Detection Technology - Old and new lines drive growth
DT’s CMD outlined strategy for the next five years. SBU might be in some ways the most mature application area, but its volume recovery will be crucial to earnings in the short-term.
All product application areas have various growth drivers
DT aims to grow at a 10% CAGR, vs the ca. 3% estimated market growth, over the next five years so that the 2030 top line would be some EUR 170m; the EUR 65m implied growth would stem in relatively even proportions from SBU, MBU and IBU, although it seems DT expects IBU to grow the most in relative terms as there’s big potential within TFT while the company’s software efforts should also help the area more due to the nature of its customer base and volumes. IBU demand also benefits from the fact that the detectors in such applications wear out a lot faster than the ones used within MBU and SBU. MBU too should help TFT volumes, driven by both dental and surgical applications. DT looks to grow its customer wallet share particularly in SBU, driven by mature and competitive CT products for aviation and cargo, however TFT doesn’t seem to play a big role there.
Targets imply around EUR 25m in EBITA for the year 2030
DT didn’t make changes to its medium-term financial targets; in our view the 15% EBITA margin target is realistic especially if the targeted growth materializes (due to operational leverage). DT is positioned as an OEM product enabler, so it doesn’t need to use huge amounts of money on relatively mature technologies like CT, yet R&D as a share of revenue might remain in the double-digits due to emerging technologies such as photon counting as well as the ambition to strengthen TFT and software capabilities. SBU is perhaps the most mature area from a technology perspective, while MBU and IBU are likely to see more changes.
We make no estimate changes at this point
China stays a key location for DT in terms of demand and production, yet the Oulu manufacturing share might grow to 15% next year. India is another opening but will not alter DT’s China exposure much very soon. DT has indicated it will resume double-digit growth early next year, and in our view it’s reasonable to expect a similar rate for FY’26 as SBU volumes recover while MBU and IBU have many drivers. DT is valued 15x EV/EBIT on our FY’25 estimates, but the multiple should decline to 9x next year since earnings are to recover with volumes. We retain our EUR 11.5 TP and ACCUMULATE rating.