Detection Technology - Not many good news needed
DT reports Q1 results on Apr 23. It shouldn’t take more than to maintain last year’s rather low EBITA level to see gains, and in the base case of some growth upside is already meaningful.
Growth seen at least over the course of H1’26
DT’s FY’26 should be significantly better than the comparison period throughout the year; we estimate some 9% y/y growth for Q1 as security starts to recover, albeit still not growing as fast as medical or industrial since APAC and especially China limit growth. Security however could well grow faster than medical over the course of this year, and we estimate security growth to accelerate to a double-digit rate in Q2; volume rebound is underpinned by European security demand as two-thirds of planned carry-on baggage CT systems in the continent are yet to be deployed. DT’s relevant security product development initiatives aim to help its OEM customers’ service and maintenance operations become more price competitive so that their costs decline faster than revenues.
Volume recovery will drive earnings higher
DT’s value chain position requires vigilance in terms of remaining price competitive and keeping good care of its relatively concentrated base of larger customer accounts; pricing however has not been the biggest challenge since DT’s gross margin has remained around 45% and is quite well in line with those of closest peers. DT’s EBITA recovery should be especially driven by traditional security CT, where margins are better than in medical, but also by industrial TFT flat panels. We estimate security and industrial both to reach double-digit growth this year and expect adj. EBITA to gain roughly EUR 1m y/y per quarter over the course of the year. We estimate some 12% EBITA margin for the year, or almost 200bps lower than in FY’24 when security revenue reached EUR 46.3m (vs our EUR 39.8m FY’26 estimate).
Potential for a big re-rating over the course of this year
Based on last year’s EBITA of EUR 9.6m DT is currently valued 12x, and on our EUR 13.5m FY’26 estimate the multiple is only 8.5x; both are fractions of peer multiples, so it shouldn’t take much positive news from now on to see significant upside even if the peer group is not perfect from the perspective of value chain positioning overlap and competitive dynamics. In our view it shouldn’t take much more than moderately positive volume development for upside to materialize. Our new TP is EUR 12.0 (13.0) as we retain BUY rating.