Detection Technology |

A growing global provider of X-ray detector solutions

| Finland

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Financial overview

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Detection Technology - Slight dent in growth story

11.02.2020 | Company update

DT reported a Q4 that clearly missed ours and market expectations. DT’s lowered medium-term financial target regarding sales growth also put a slight dent in our growth story investment case. Due to the miss and lowered medium-term growth target, we have clearly cut our estimates for the coming years. Despite our estimates cut, we remain, as noted in our preview comment, positive towards the longer-term investment case as we continue to see DT executing well on a growth market with strong drivers. Our target price remains EUR 24, recommendation is now HOLD (prev. BUY).

Q4 result missed clearly expectations, FY’19 growth decent

DT’s Q4 net sales amounted to EUR 25m (-2.5% y/y) vs. EUR 27.7m/27.4m Evli/consensus estimates. Q4 EBIT was EUR 3.2m (12.8% margin) vs. EUR 5.1m/4.7m Evli/cons. R&D costs amounted to EUR 2.66m or 10.6% of net sales. Dividend proposal is 0.38 (0.38 Evli / 0.39 cons.). SBU had net sales of EUR 16.4m vs. EUR 19m Evli estimate. SBU sales grew 6% y/y, but growth was affected by temporarily lower sales in CT products and delayed deliveries to one key customer. MBU delivered net sales of EUR 8.6m which was in line with our estimate of EUR 8.7m. Net sales of MBU decreased by -15.4% y/y due to continued softness in the medical imaging market. In FY’19, DT posted +9.2% growth (+5.5% in FY’18), with 16.6% EBIT-margin (19.7% in FY’18) hampered by increased costs and slowdown in MBU.

Growth to continue in 2020, but circumstances lower visibility

As usual, the visibility in DT’s case is quite low. DT estimates annual growth to remain at previous 5-6% level in all market segments in 2020, but coronavirus may have a temporary adverse impact on growth in H1. DT also estimates the temporary slowdown in the global medical CT market to continue in Q1, and the situation to normalize at the end of 2020. DT still sees H1 growth despite headwinds. DT expects significant sales contribution in 2020E from recently launched Aurora product family for SBU as well as roughly 1 MEUR contribution from X-Panel on MBU side.

Updated financial targets puts slight dent in growth story

DT updated its medium-term financial targets; DT now aims to grow at least 10% (prev. 15%) and achieve EBIT-margin at or above 15% (no change) in medium term. DT announced in Q2’19 its updated strategy until 2025; the new strategic target is to be the growth leader in digital x-ray imaging detector solutions and a significant player in other technologies and applications where the company sees good business opportunities. DT estimates that the market for digital x-ray imaging detector solutions will be around EUR 3 billion in 2025. DT’s previous strategy until 2020 was based on being the leader in computed tomography and line-scan x-ray detectors and solutions. The total market, as per the company's previous strategy, is estimated to be around EUR 700 million in 2020, of which DT has roughly 20% share. Despite a larger market scope, DT sees moderating the sales growth targets as prudent as growth becomes more difficult as a +100 MEUR revenue company. We’ve emphasized the growth story in our investment case based on the strong growth drivers, especially in China, where Beijing’s “Made in China 2025” initiative has led to double digit growth rates for many local Chinese OEM’s that are DT’s clients. Although market drivers remain intact, we lower our sales growth estimates for 2020-21E from 14-15% to 10-12.5% based on the updated financial targets.

Estimates cut, we maintain target price of EUR 24

Based on the Q4 report and lowered longer-term sales growth targets, we have cut our sales estimates 7-9% and our EBIT estimates 17-20% for 2020-21E. We now estimate DT to grow 10% and 12.5% in 2020-21E (prev.14-15%). We estimate 2020E EBIT to grow 12% to 19 MEUR (17% EBIT margin) as SBU’s Aurora volumes ramp-up in H2 and MBU returns to growth mode after temporary slowdown. On our new estimates, DT is trading at ‘20E 17.2x EV/EBIT and 23.6x P/E, which is broadly in line with our peer group. Despite our estimates cut, we remain, as noted in our preview comment, positive towards the longer-term investment case as we continue to see DT executing well on a growth market with strong drivers. We do not however currently have enough conviction in our estimates; therefore, we maintain our target price at EUR 24, recommendation is now HOLD (prev. BUY).

Detection Technology - Q4 result miss, moderates its financial targets

10.02.2020 | Earnings Flash

DT’s Q4 net sales at EUR 25m (-2.5% y/y) vs. EUR 27.7m/27.4m Evli/consensus estimates. SBU sales grew +6% to EUR 16.4m (EUR 19m our expectation) and MBU sales declined -15.4% to EUR 8.6m (EUR 8.7m our expectation). DT’s Q4 EBIT came in at EUR 3.2m vs. our estimates of EUR 5.1m (EUR 4.7m cons). EBIT excluding non-recurring items was EUR 3.9 million (4.9 Q4’18). Dividend proposal is 0.38 (0.38 Evli / 0.39 consensus).

• Group level results: Q4 net sales amounted to EUR 25m (-2.5% y/y) vs. EUR 27.7m/27.4m Evli/consensus estimates. Q4 EBIT was EUR 3.2m (12.8% margin) vs. EUR 5.1m/4.7m Evli/cons. R&D costs amounted to EUR 2.66m or 10.6% of net sales. Dividend proposal is 0.38 (0.38 Evli / 0.39 cons.).

• Security and Industrial Business Unit (SBU) had net sales of EUR 16.4m vs. EUR 19m Evli estimate. SBU sales grew 6% y/y but growth was affected by temporarily lower sales in CT products and delayed deliveries to one key customer.

• Medical Business Unit (MBU) delivered net sales of EUR 8.6m which was in line with our estimate of EUR 8.7m. Net sales of MBU decreased by -15.4% y/y due to softening in the medical CT market and the ramp-down of one key MBU customer’s product.

• Outlook update: DT estimates annual growth to remain at previous 5-6% level in all market segments in 2020, but the indirect impacts of the corona virus epidemic in Asia may have a temporary adverse impact on growth in H1. DT also estimates the temporary slowdown in the global medical CT market to continue in Q1, and the situation to normalize at the end of 2020, but demand may fluctuate significantly.

• New financial targets: DT aims to increase sales by at least 10% per annum and to achieve an operating margin at or above 15% in the medium term. (Previous target: to increase sales by at least 15% p.a. and to achieve an EBIT margin at or above 15% in the medium term)

Detection Technology - Coronavirus could pose near term threat to our estimates

06.02.2020 | Preview

Detection Technology will report Q4 earnings next Monday, February 10th. As majority of DT’s production and personnel is located in China, with Asia representing some 2/3 of DT’s total net sales, the effects of the coronavirus will be a key focus. Despite possible headwinds related to coronavirus, we remain positive to the investment case. Our rating and target price of EUR 24 remain intact ahead of Q4.

Q4 wraps up a year of decent growth

The security imaging market has been experiencing strong demand due to increasing CT investments related to new EU and US airport standards, while medical imaging market is going through a temporary slowdown. For Q4’19, we estimate SBU growing 23% and MBU declining 14% y/y, with total Q4 net sales growing 8% y/y to 27.7 MEUR (27.4 MEUR cons). Our Q4 EBIT estimate is 5.1 MEUR (4.7 MEUR cons), which is +15% compared to slightly low comparison figures of 4.4 MEUR in Q4’18. On a whole, we expect FY’19E sales growth of 12% (FY’18 5.5%) and flat EBIT growth due to increasing R&D investments and lower MBU sales and share in mix. Our DPS estimate is 0.38 (0.39 cons.), which is on par with last year’s dividend due to flat net profit growth in 2019.

Growth story to continue despite coronavirus posing a near term threat

DT usually doesn’t give full year guidance due to low visibility into customer demand. We look forward to hearing about the latest status of the medical imaging market and the effects of the coronavirus. Most of DT’s production and ~80% of personnel are located in China, with Asia representing some 2/3 of DT’s total sales. Our FY’20E sales growth estimate is +15% based on continued good growth, especially in China, and volume ramp-up of new Aurora and X-Panel CMOS products. Despite continued R&D spending, we expect EBIT improvement 2020E due to increase in sales growth and better GM’s due to mix and new products. We note however that coronavirus poses a clear near-term threat to our estimates.

Rating and TP of 24 euros maintained ahead of Q4

Despite the short visibility and possible headwinds related to coronavirus or trade politics, we see longer term investment case intact due to strong market drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. Our estimates, as well as our rating and target price of 24 euros remain unchanged ahead of the Q4 report.

Detection Technology - Growth story unabated

28.10.2019 | Company update

Detection Technology delivered a healthy Q3 report, which was broadly in line with expectations. We remain positive to the investment case and have slightly adjusted upwards our estimates. Our rating remains BUY with revised target price of 24.0 euros (prev. 23.5).

Healthy Q3 with strong growth in SBU and softness in MBU as expected

DT’s Q3 figures came in close to expectations. Net sales amounted to EUR 26.9m (+9.5% y/y) vs. EUR 27.9m/27.6m Evli/consensus estimates. Q3 EBIT was EUR 5.1m (19.1% margin) vs. EUR 4.9m/5.2m Evli/cons. SBU sales grew 42.3% y/y to EUR 18.6m (EUR 17.9m Evli) due to strong demand especially in airport applications. MBU sales decreased by -27.6% y/y to EUR 8.4m (EUR 10m Evli) due to softening of the medical CT market and the ramp-down of one key MBU customer’s product. R&D costs amounted to EUR 2.6m or 9.7% of net sales.

Small estimate changes - growth drivers remain strong

Post Q3, we have made only minor upward adjustments to our estimates. Demand for new standard CT systems for airports has accelerated, starting with Europe and the US as previously noted. Chinese authorities are also commencing their standardization of airport CT equipment, which will support security outlook even further, likely starting 2021 onwards. The slowdown in medical market remains a question which management does not have a clear answer on, but most likely this is only temporary. Overall, DT’s growth drivers remain strong, especially in China where Beijing’s “Made in China 2025” initiative, has led to double digit growth rates for local Chinese OEM’s that are DT’s clients. Further support for DT’s future sales growth is provided by DT’s new product launches such as Aurora, a lower-end and price competitive product family for SBU, and X-Panel, a CMOS flat panel detector product family for static imaging (e.g. dental).

The strategy update in Q2 report affirmed that DT is committed to continue growth - no change to medium-term financial targets

In conjunction with its Q2 result, DT announced its updated strategy until 2025. The company's new strategic target is to be the growth leader in digital x-ray imaging detector solutions and a significant player in other technologies and applications where the company sees good business opportunities. The company estimates that the market for digital x-ray imaging detector solutions will be around EUR 3 billion in 2025. DT’s previous strategy until 2020 was based on being the leader in computed tomography and line-scan x-ray detectors and solutions. The total market, as per the company's previous strategy, is estimated to be around EUR 700 million in 2020. Given DT’s current estimated 2019E sales of above 100 MEUR, it’s fair to say that DT is a leader in the scope of the previous strategy. The new 2025 strategy expands the addressable market to an estimated EUR 3 billion in 2025, which will provide plenty of growth opportunity for DT going ahead. DT’s medium-term financial targets remain unchanged; sales growth at least 15% per annum and operating margin at or above 15% in the medium term.

Valuation remains attractive, we maintain BUY recommendation

On our estimates, DT is trading at ~20% discount on EV/EBIT and P/E multiples for ’19-20E, which we see as unjustified. Despite the short visibility, we see investment case attractive due to strong market drivers, especially in China, as well as DT’s compelling strategy and execution capabilities, which should enable DT to grow faster than the market and maintain above target level margins. Due to its proximity to the fastest growing market China and current valuation, DT could be also become an acquisition target. Our target price translates into an EV/EBIT multiple of 16.8x and 13.4x on our ‘19E and ‘20E estimates, some 6-20% under our peer group median, i.e. still leaving upside potential should investment case materialize as expected. Our rating remains BUY with revised target price of 24.0 euros (prev. 23.5).

Detection Technology - Q3 result broadly in line

25.10.2019 | Earnings Flash

DT’s Q3 net sales at EUR 26.9m (+9.5% y/y) vs. EUR 27.9m/27.6m Evli/consensus estimates. SBU sales grew +42.3% to EUR 18.6m (EUR 17.9m our expectation) and MBU sales declined -27.6% to EUR 8.4m (EUR 10.0m our expectation). DT’s Q3 EBIT came in at EUR 5.1m vs. our estimates of EUR 4.9m (EUR 5.2m cons).

  • Group level results: Q3 net sales amounted to EUR 26.9m (+9.5% y/y) vs. EUR 27.9m/27.6m Evli/consensus estimates. Q3 EBIT was EUR 5.1m (19.1% margin) vs. EUR 4.9m/5.2m Evli/cons. R&D costs amounted to EUR 2.6m or 9.7% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 8.4m which was below our estimate of EUR 10.0m. Net sales of MBU decreased by -27.6% y/y due to softening of the medical CT market and the ramp-down of one key MBU customer’s product.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 18.6m vs. EUR 17.9m Evli estimate. SBU sales grew 42.3% y/y due to strong demand especially in airport applications.
  • Outlook update: DT expects growth in net sales, but growth to slow down in Q4 compared to the previous year. Previous guidance was for Q3.
  • Medium-term business outlook is unchanged: to increase sales by at least 15% p.a. and to achieve an EBIT margin at or above 15% in the medium term.

Detection Technology - Expecting growth to continue despite MBU headwinds

22.10.2019 | Preview

Detection Technology will report Q3 earnings this Friday, October 25th. We’ll be looking for commentary regarding the market outlook and possible effects of trade politics, with special focus on the extent of the slowdown in medical imaging market growth and the effects of the ramp-down of one of DT’s key medical customer’s product in H2. Despite some short-term headwinds, we remain positive to the investment case. Our BUY rating and target price of EUR 23.5 remain intact ahead of Q3.

Expecting strong growth in SBU, MBU softness in turn

While the security imaging market is experiencing strong demand due to increase in Chinese investments and increasing CT investments related to new EU and US airport standards, DT noted in its Q2 report that it expects a temporary slowdown in medical imaging market growth. DT has guided for Q3 sales to grow above 10%, with SBU net sales growing and MBU sales decreasing. For Q3, we estimate SBU growing 37% and MBU declining 13% y/y, with total Q3 net sales growing 13.6% y/y to 27.9 MEUR (27.6 MEUR cons). Our Q3 EBIT estimate is 4.9 MEUR (5.2 MEUR cons) compared to 5.1 MEUR in Q3’18.

Flat EBIT this year, but growth story continues

For full year 2019E, we expect net sales to grow 14% to 107 MEUR driven by SBU’s return to growth of 28% after a weaker 2018. We expect ‘19E MBU net sales growth to decline 7.6% due to the temporary slowdown in customer demand and the ramp-down of key customer’s product in H2. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting the mix, as well as increased pricing competition in both segments.

BUY rating and TP of 23.5 euros maintained ahead of Q3

Despite the short visibility and trade politics being unpredictable, we see investment case intact due to strong market drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. Our estimates, as well as our BUY rating and target price of 23.5 euros remain unchanged ahead of the Q3 report.

Detection Technology - MBU slowdown, but growth story continues

05.08.2019 | Company update

Detection Technology's Q2 result slightly missed our and consensus expectations. MBU outlook remains mixed for the rest of the year, but this is temporary, and we see investment case intact. We maintain BUY rating and target price of 23.5 euros.

Strong growth in SBU, MBU softness in turn

DT’s Q2 result slightly missed our and consensus expectations with Q2 net sales of EUR 27.5m (+12.8% y/y) vs. EUR 28.5m/28.1m Evli/consensus estimates. Q2 EBIT was EUR 4.8m (17.5% margin) vs. EUR 5.4m/5.1m Evli/cons. SBU sales were clearly better than we expected at 19.4 MEUR (+27.4%, 17.8 MEUR Evli estimate), due to strong demand in China and increasing CT investments related to new EU and US airport standards. MBU Q2 sales were 8.1 MEUR (-11.5% y/y, 10.7 MEUR Evli estimate), which was unexpected since DT in Q1 expected both BU’s to grow in Q2. The decline was attributed to a slowdown in medical CT demand and the sooner than expected ramp down of a key customer’s product. While SBU is now in turn enjoying good demand, the softness in the medical market is expected to be temporary but continuing at least until the end of the year.

Visibility remains low, but overall investment case intact

DT revised its outlook for the rest of the year citing short visibility into customer demand and unpredictable trade politics. DT previously expected total sales to grow during the second half of the year. DT is now guiding for Q3 sales to grow above 10%. Based on the result, we have made only small changes to our headline estimates 2019 and onwards. We expect 2019E net sales to grow 13.7% to EUR 107m driven by SBU’s return to growth of 28% on weak comparables. We expect ‘19E MBU net sales to decline by -7.6% due to the ramp-down of key customer’s product in H2 and slowdown in medical demand. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting the mix, as well as increased pricing competition in both segments.

Strategy update for 2025 period, no change to medium-term financial targets

In conjunction with the result, DT announced its updated strategy until 2025. The company's new strategic target is to be the growth leader in digital x-ray imaging detector solutions and a significant player in other technologies and applications where the company sees good business opportunities. The company estimates that the market for digital x-ray imaging detector solutions will be around EUR 3 billion in 2025. DT’s previous strategy until 2020 was based on being the leader in computed tomography and line-scan x-ray detectors and solutions. The total market, as per the company's previous strategy, is estimated to be around EUR 700 million in 2020. Given DT’s current estimated 2019E sales of above 100 MEUR, it’s fair to say that DT is a leader in the scope of the previous strategy. The new 2025 strategy’s market scope is broader, but DT’s medium-term financial targets remain unchanged; sales growth at least 15% per annum and operating margin at or above 15% in the medium term.

DT is well positioned to benefit from digitalization since the company’s product portfolio already consists of digital radiography products that are used in digital X-ray solutions. There are also new emerging technologies (e.g. CMOS, multi energy) that DT has invested in with the strategic goal to be the growth leader when the emerging technologies become more adapted. To our understanding, the security X-ray equipment manufacturers have been quick to adopt digitalization. However, medical and industrial equipment manufacturers are at an earlier stage of adopting the technology.

BUY recommendation maintained

On our estimates, DT is trading at discounts on EV/EBIT and P/E multiples for ’19-20E. Although visibility is short and trade politics unpredictable, we see longer term investment case intact and therefore discount unjustified. With our estimates broadly intact, we maintain our BUY recommendation with target price of 23.5 euros. Our target price values DT at EV/EBIT-multiple of 16x and 13x on our ‘19E and ‘20E estimates, which is still clearly lower than peer group despite DT’s strong metrics.

Detection Technology - Q2 result miss, MBU outlook softer

02.08.2019 | Earnings Flash

Q2 net sales at EUR 27.5m (+12.8% y/y) vs. EUR 28.5m/28.1m Evli/consensus estimates. MBU sales were EUR 8.1m (EUR 10.7m our expectation) and SBU sales were EUR 19.4m (EUR 17.8m our expectation). DT’s Q2 EBIT came in at EUR 4.8m vs. our estimates of EUR 5.4m (EUR 5.1m cons).

  • Group level results: Q2 net sales amounted to EUR 27.5m (+12.8% y/y) vs. EUR 28.5m/28.1m Evli/consensus estimates. Q2 EBIT was EUR 4.8m (17.5% margin) vs. EUR 5.4m/5.1m Evli/cons. R&D costs amounted to EUR 2.9m or 10.7% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 8.1m which was below our estimate of EUR 10.7m. Net sales of MBU decreased by -11.5% y/y due to softening demand and earlier than expected ramp down of one key customer’s product.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 19.4m vs. EUR 17.8m Evli estimate. SBU sales grew 27.4% y/y due to strong demand in China.
  • Outlook updated: sales will grow in the SBU business and decrease in the MBU business in the third quarter. The company expects its net sales to increase in the third quarter in line with the company's financial targets. (Previous: the company's total net sales are expected to grow in the second half of the year.)
  • Medium-term business outlook is unchanged: to increase sales by at least 15% p.a. and to achieve an EBIT margin at or above 15% in the medium term.
  • Strategy update: new strategic target is to be a growth leader in digital x-ray imaging detector solutions. DT estimates the market size of digital x-ray detectors to be around EUR 3 billion in 2025. DT’s focus in the 2020 strategy done five years ago was primarily on the CT and line scan x-ray detector and solution markets, which size is estimated to be around EUR 700 million in 2020.

Detection Technology - Expecting good growth, flat EBIT

29.07.2019 | Preview

Detection Technology will report Q2 earnings this Friday, August 2nd. Our focus will be on commentary regarding the market outlook for both security and medical business units. With SBU currently exhibiting a good growth profile, we’re looking for color on the possibility of MBU growth mitigating the negative effects of the ramp-down of one of DT’s key medical customer’s product in H2. Our rating and target price remain intact ahead of Q2.

Expecting good growth in both SBU and MBU

DT has guided for double digit growth for both BU’s in Q2. We estimate SBU growing 17% and MBU 16% y/y, which is in line with DT’s Q2 guidance. We expect Q2 net sales of 28.5 MEUR (+16.7% y/y, 28.1 MEUR cons.) and 5.4 MEUR EBIT (+2% y/y), 5.1 MEUR cons.). Our EBIT expectation is flat due to increase in R&D spending. Overall, the outlook for SBU is positive with the security market picking up momentum after a decline in the end of last year. Demand is increasing due to the Chinese security market returning to growth and increasing CT investments related to new EU and US airport standards. The outlook for MBU is however more mixed with one key MBU customer ramping down sales of one of DT’s product in H2. Despite this, H2 net sales are expected to grow compared to last year. With SBU exhibiting a good growth profile, we’re looking for color on the possibility of MBU growth mitigating the effects of the product ramp-down in H2.

Flat EBIT this year, but growth story continues

For full year 2019E, we expect net sales to grow 11% to EUR 104m driven by SBU’s return to growth of 17.8% on weak comparables. We expect ‘19E MBU net sales growth to be flat due to the ramp-down of key customer’s product in H2. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting the mix, as well as increased pricing competition.

BUY rating and TP of 23.5 euros maintained ahead of Q2

Our estimates, rating and target price of 23.5 euros remain unchanged ahead of Q2 report.

Detection Technology - SBU back in business

29.04.2019 | Company update

DT’s Q1 result was in line with our expectations. The updated outlook and comments regarding SBU market support our positive view on DT. On the back of our revised estimates and valuation, we maintain our BUY recommendation with new target price of 23.5 euros (prev. 19).

Good start to the year, SBU back on track

Q1 result was in line with our expectations. Q1 net sales amounted to EUR 23.1m (+19.3x% y/y) vs. EUR 22.3m/22.6m Evli/consensus estimates. Q1 EBIT was EUR 3.9m (16.7% margin) vs. EUR 4.1m/4.0m Evli/cons. SBU sales grew 22.9% to EUR 14.5m vs. EUR 13.6m Evli estimate. MBU sales were EUR 8.6m vs. EUR 8.8m Evli estimate. R&D costs were EUR 2.5m, up 28% as indicated earlier. SBU market demand has picked up, with increasing CT investments starting in US airports. We have estimated the upcoming airport related EU and US standards to offer DT additional sales in the range EUR 20-30m in the coming years. See our report for more details.

EBIT growth taking a breather this year, longer-term investment case intact

Based on the SBU market pick up, we have moderately raised our sales estimates for ’19-21E. We expect ‘19E net sales to grow 11% to EUR 104m driven by SBU’s return to growth of 17.8% on weak comparables. We expect ‘19E MBU net sales growth to be flat due to the ramp-down of key customer’s product in H2. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting mix, as well as increased pricing competition. Despite flat EBIT this year, longerterm investment case is intact. We see DT’s investments this year securing its growth and profitability drivers for the coming years.

Maintain BUY recommendation with new TP of 23.5 (19)

On our estimates, DT is trading at discounts on EV/EBIT, EV/EBITDA and P/E multiples for ’19-20E. We see discount as unjustified given the attractive longer-term investment case. On the back of our revised estimates and valuation, we maintain our BUY recommendation with new target price of 23.5 euros (19).

Detection Technology - Q1 result in line, updated outlook

26.04.2019 | Earnings Flash

Q1 net sales at EUR 23.1m (+19.3% y/y) vs. EUR 22.3 m/22.6m Evli/consensus estimates. MBU sales were EUR 8.6m (EUR 8.8m our expectation) and SBU sales were EUR 14.5m (EUR 13.6m our expectation). DT’s Q1 EBIT came in at EUR 3.9m, which is in line with our estimates of EUR 4.1m (EUR 4.0m cons).

  • Group level results: Q1 net sales amounted to EUR 23.1m (+19.3x% y/y) vs. EUR 22.3m/22.6m Evli/consensus estimates. Q1 EBIT was EUR 3.9m (16.7% margin) vs. EUR 4.1m/4.0m Evli/cons. R&D costs amounted to EUR 2.5m or 10.8% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 8.6m which was in line with our estimate of EUR 8.8m. Net sales of MBU increased by 13.8% y/y due to continued good demand from key customers and successful shipments.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 14.5m vs. EUR 13.6m Evli estimate. SBU sales grew 22.9% y/y due to increased demand for security solutions.
  • Updated outlook: sales of both business units will grow in line with the company's financial targets in the second quarter. The company expects demand to decline in the MBU business in the second half of 2019, as a significant customer will ramp down production of a device that uses DT's solution. Despite this, the company's total net sales are expected to grow in the second half of the year. There is uncertainty regarding demand, and the intensification of competition might be reflected in product prices.
  • Medium-term business outlook is unchanged: Detection Technology aims to increase sales by at least 15% per annum and to achieve an operating margin at or above 15% in the medium term.

Detection Technology - Expecting to fire on both cylinders in Q1

17.04.2019 | Preview

Detection Technology will report Q1 earnings next week on Friday April 26th. We expect both business units to perform well in Q1, with SBU growth coming back on track and MBU’s good momentum continuing. Our focus will be on the expected pick up of the security market and market comments. Our rating and TP remain intact ahead of Q1.

Security market expected to pick up again

DT said in their Q418 result that they saw signs of security market picking up again and overall the beginning of the year is expected to be strong in all markets. Consequently, DT expects double digit sales growth in the first half, but second half is however more uncertain, with of one of MBU’s major customers ramping down manufacturing of a certain device. We expect both BU’s to perform well in Q1, with SBU growing 15% and MBU 17% yoy. We expect Q1 net sales to be 22.3 MEUR (19.3 MEUR Q118) and Q1 EBIT to be 4.1 MEUR (3.7 MEUR Q118). Consensus is expecting Q1 net sales of 22.6 MEUR and EBIT of 4.0 MEUR.

Varex acquiring Direct Conversion AB for 75 MEUR

DT’s peer company, Varex Imaging, recently announced its intent to acquire 90% of Direct Conversion AB for a price of 75 MEUR for the whole company. The Swedish company had net sales of 16 MEUR in 2018, which means a 4.7x EV/Sales deal multiple. This further proves the potential seen in direct conversion and photon counting, an area which DT is also investing in with its asset purchase deal of the French MultiX.

BUY rating and TP of 19 euros maintained ahead of Q1

For 2019E, we expect DT’s net sales to grow 7.5% to EUR 100.9m driven by SBU’s return to growth of 11.5% on slightly weaker comparables. We expect 2019E MBU net sales growth to be flat due to the ramp-down of key customer’s product in H2. We estimate 2019E EBIT to be EUR 18.9m (19.1m 2018) and EBIT margin to decrease to 18.8% from 19.7% level of 2018 due to higher R&D costs (30% higher vs. 2018). Our rating “BUY” and TP EUR 19.0, remain unchanged ahead of Q1.

Detection Technology - Outlook favorable with attractive pockets of growth

04.02.2019 | Company update

Detection Technology’s Q4 result was in line with our expectations. Post Q4, our estimates for 2019E and 2020E remain intact. DT is trading at a discount, which we see as unjustified given the attractive longer-term investment case. We raise our recommendation to BUY with a target price of 19 euros (16.5).

Q4 result in line with our expectations

DT’s Q4 net sales amounted to EUR 25.7m (-6.8% y/y) vs. EUR 25.8m/27.7m Evli/consensus estimates. MBU sales were EUR 10.1m (EUR 10.8m our expectation) and SBU sales were EUR 15.5m (EUR 15.0m our expectation). DT’s Q4’18 EBIT came in at EUR 4.9m, which was in line with our estimates of EUR 5.2m (EUR 5.8m cons). Dividend proposal was 0.38, which was lower than our estimate of 0.45.

Outlook favorable with attractive pockets of growth

Our estimates for 2019E and 2020E remain intact post Q4. We expect DT’s 2019E net sales to grow 7.5% to EUR 100.9m driven by SBU’s return to growth of 11.5% on weak comparables. We expect MBU net sales growth to be flat due to the ramp-down of key customer’s product. We estimate 2019E EBIT to be EUR 18.9m (19.1m 2018) and EBIT margin to decrease to 18.8% from 19.7% level of 2018 due to higher R&D costs (30% higher vs. 2018). Despite our modest sales growth and flattish margin expectations for 2019E and the uncertainty around the extent of the ramp-down impact on MBU in H2, DT has several interesting pockets of growth (such as the MultiX acquisition, CMOS flat panel detectors for dental applications, and the Aurora product family for lower mid SBU clients), which are not reflected in our estimates but if materialized, offer clear support for the investment case.

Upgrade to BUY and target price of 19 euros (16.5)

On our estimates, DT’s 2019E-2020E EV/EBIT, EV/EBITDA and P/E are roughly 30%, 20%, 20% respectively below our peer group median. Despite a small cap discount, we see discount as unjustified given the attractive longer-term investment case. We raise our recommendation to BUY with a target price of 19 euros (16.5).

Detection Technology - Q4 result in line, outlook stable

01.02.2019 | Earnings Flash

Q4 Net sales amounted to EUR 25.7m (-6.8% y/y) vs. EUR 25.8m/27.7m Evli/consensus estimates. MBU sales were EUR 10.1m (EUR 10.8m our expectation) and SBU sales were EUR 15.5m (EUR 15.0m our expectation). DT’s Q4’18 EBIT came in at EUR 4.9m, which is in line with our estimates of EUR 5.2m (EUR 5.8m cons). Dividend proposal is 0.38, which is lower than our estimate of 0.45.

  • Group level results: Q4 net sales amounted to EUR 25.7m (-6.8% % y/y) vs. EUR 25.8m/27.7m Evli/consensus estimates. Meanwhile, Q4 EBIT was EUR 4.9m (19.2% margin) vs. EUR 5.2m/5.8m Evli/cons. R&D costs amounted to 9.3% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 10.1m which was slightly above our estimate of EUR 10.8m. Net sales of MBU increased by 24.3% y/y due to well-developed demand from key customers.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 15.5m vs. EUR 15.0m Evli estimate. SBU sales declined by -19.9% y/y due to Chinese transport infrastructure projects being on hold and intensified competition.

Outlook: DT expects sales to grow in both business units and geographically in all markets and believes that the company will achieve double-digit revenue growth. However, the second half of the year will be challenging for MBU sales, because one of DT’s major customers will ramp down manufacturing of a device that uses a DT solution.

Medium-term business outlook is unchanged: Detection Technology aims to increase sales by at least 15% per annum and to achieve an operating margin at or above 15% in the medium term.

Detection Technology - Focus on outlook for 2019 and China

24.01.2019 | Preview

Detection Technology will report Q4 earnings next week on Feb 1st. Our focus will be on the latest comments regarding China and the overall medical and security market outlook for 2019. We expect a dividend of EUR 0.45, which corresponds to a 40% EPS payout and 3% dividend yield. Our rating and target price remain intact ahead of Q4.

SBU net sales to decline in Q4, MBU still going strong in Q4

Due to a slowdown in China’s security market and tightening competition, DT has said it expects SBU sales to decline y/y in Q4’18, in contrast to the earlier guided single-digit y/y growth for H2’18. The visibility is limited due to the suspension of many Chinese infrastructure projects. We expect SBU Q4 net sales to be 15.0 MEUR (vs. 19.4 MEUR Q417). We expect continued good growth in MBU with Q418E net sales of 10.8 MEUR (vs. 8.1 MEUR Q417).

2019 outlook in focus, especially comments on China

DT expects net sales to grow moderately at the beginning of 2019. This estimate is based on the growth outlook for the overall X-ray imaging market, which is similar for 2019 as 2018, according to DT. In the Q4 call we look forward to hearing an update on the outlook and the Chinese market, as well as any new news regarding the recently released Aurora X-ray detector family (expected to support SBU’s net sales at end of 2019).

Estimates unchanged ahead of Q4, HOLD rating and target price of 16.5 euros maintained

We expect Q4 net sales to be 25.8 MEUR (vs. 27.5 MEUR Q417) and Q4 EBIT to be 5.2 MEUR (vs. 7.0 MEUR Q417). Thus, we expect 2018E net sales to grow 6% to 94.1 MEUR from last year’s 89 MEUR and EBIT to decline 3% from last year (19.3 MEUR 2018 vs. 19.9 MEUR 2017) due to lower SBU sales and higher R&D costs. We expect a dividend of EUR 0.45, which corresponds to a 40% EPS payout and 3% dividend yield. Our rating and target price, “HOLD” and target price EUR 16.5, remain unchanged ahead of Q4.

Detection Technology Q319 interview with CEO Hannu Martola

Detection Technology - Q319 video interview with CEO Hannu Martola

28.10.2019
Detection Technology presentation video

Detection Technology - Video presentation

02.09.2019
Detection Technology company presentation 27082019

Detection Technology - Company presentation

27.08.2019
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Detection Technology company presentation 27082019

Video presentation

Company Facts

Financial targets

At least 10% annual sales growth and EBIT margin at or above 15% in the medium term

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