Detection Technology - Gap quarter
DT issued a profit warning and lowered its Q2 guidance due to a product quality issue in the supply chain and component shortage. With our near-term estimates lowered, we retain our HOLD-rating and lower TP to EUR 20.0 (22.5).
Soft quarter underway
DT lowered its Q2 guidance and expects group revenue to decline y/y. The weaker-than-expected development of net sales is attributed to a product quality issue in the supply chain and the challenges for the company and its customers to purchase other critical components. Even though the product quality issue has been resolved, some MBU sales will be postponed to Q3 due to delays in the supply chain.
We lowered our estimates
Due to the issues mentioned above, we downgraded our 2022 estimates (especially MBU’s) and took a more cautious stand on our near-future expectations, despite the fact that the company is expecting to see double-digit growth in H2’22. DT noted also that the underlying demand remains strong, and, to our understanding, upcoming product updates are expected to reduce DT’s exposure to the component shortage starting from Q3. Driven by DT’s strong leverage of earnings and with net sales decreasing, our Q2’22E EBIT estimate faced quite hefty downgrade, declining ~20% from what we earlier expected. More on page 2.
HOLD with a target price of EUR 20.0 (22.5)
Driven by the decline of our 22E EBIT estimate and increased uncertainty, we have adjusted our TP to EUR 20.0 (22.5). Both peer group’s and DT’s valuations have been quite stable since our last update (28th April). DT is now trading with 22-23E EV/EBITDA multiples of ~16-13x and EV/EBIT multiples of ~20-15x. At this stage, we will accept a 22E EV/EBIT multiple of 20x as in 2023 DT’s valuation drops near its peer valuation with our new target price. We retain our HOLD-rating.
DT lowered its Q2 guidance and expects group revenue to decline y/y. The weaker-than-expected development of net sales is attributed to a product quality issue in the supply chain and the challenges for the company and its customers to purchase other critical components. Even though the product quality issue has been resolved, some MBU sales will be postponed to Q3 due to delays in the supply chain.
We lowered our estimates
Due to the issues mentioned above, we downgraded our 2022 estimates (especially MBU’s) and took a more cautious stand on our near-future expectations, despite the fact that the company is expecting to see double-digit growth in H2’22. DT noted also that the underlying demand remains strong, and, to our understanding, upcoming product updates are expected to reduce DT’s exposure to the component shortage starting from Q3. Driven by DT’s strong leverage of earnings and with net sales decreasing, our Q2’22E EBIT estimate faced quite hefty downgrade, declining ~20% from what we earlier expected. More on page 2.
HOLD with a target price of EUR 20.0 (22.5)
Driven by the decline of our 22E EBIT estimate and increased uncertainty, we have adjusted our TP to EUR 20.0 (22.5). Both peer group’s and DT’s valuations have been quite stable since our last update (28th April). DT is now trading with 22-23E EV/EBITDA multiples of ~16-13x and EV/EBIT multiples of ~20-15x. At this stage, we will accept a 22E EV/EBIT multiple of 20x as in 2023 DT’s valuation drops near its peer valuation with our new target price. We retain our HOLD-rating.