Detection Technology - Getting back to speed
DT reports Q4 results on Feb 5. Last year was challenging, but now Q1’26 should see double-digit growth; a similar pace could continue in Q2 and beyond, in which case earnings multiples would start to look quite cheap soon enough.
All regions and application areas should grow this year
DT saw softer than expected volumes in FY’25, and Q4’25 might be slightly weaker than previously estimated, yet demand outlook finally starts to look firmer for its bread-and-butter CT applications over the course of FY’26 as the recovery of SBU volumes should drive double-digit growth for Q1. Such a strong growth trend could continue over the summer, while the outlook in China remains a bit uncertain; MBU nevertheless should grow at least over H1. We expect Q4’25 revenue to decline 7% y/y and estimate EBITA to fall by EUR 1.5m y/y to EUR 3.7m. For FY’26 we estimate 10% revenue growth, however earnings are likely to fall a couple of percentage points short of the 15% EBITA target.
FY’26 earnings still not very high but improving significantly
R&D investments are to grow in line with sales this year, while product mix is still not very favorable as it remains relatively tilted towards MBU since SBU is only recovering from the recent decline. Chinese pricing pressure continues, a headwind for gross margin although relatively strong TFT sales (driven by defence NDT applications within IBU) compensate so that it should stay quite flat. DT aims to grow at a CAGR of 10% over the next five years, and its target for TFT sales implies more than twice that rate. FY’26 may still be more characterized by the recovery of traditional CT volumes, while MBU TFT growth is yet to come. Line scan remains important for IBU, where the food industry drives volumes. DT also has high expectations for the X-Cargo product as European countries like Poland invest in cargo security. It thus seems DT has many growth drivers for H1’26, but this also means its inventories grow.
Earnings multiples could turn quite attractive soon
We estimate 12% EBIT margin for FY’26, on which basis DT is valued some 10x EV/EBIT; the margin is not yet very high, but earnings growth should continue also in FY’27 when the multiple would decline to around 8x. On the FY’25 EV/EBIT of 16x the valuation isn’t very cheap yet still significantly below peer multiples. As FY’26 is now set to be significantly better than the previous one our new TP is EUR 12.0 (11.5); we retain ACCUMULATE rating.