Detection Technology - Growth well beyond this year

SBU still drives growth, while IBU should also begin to add

MBU has seen soft demand due to the Chinese efforts to target their healthcare sector corruption. The market hasn’t yet been much better, and even if it’s nearing stabilization the growth rate of MBU will remain below those of SBU and IBU at least over the next few quarters. MBU is neither helped by the market’s price erosion of 5-10% p.a., however its softness is compensated by SBU strength. IBU saw soft demand in Q1 due to the food industry but its organic outlook has now improved, besides which the DTS acquisition helps. We estimate DT Q2 revenue growth at a bit below 2% y/y as MBU still declines at a double-digit rate while SBU and IBU grow around 15%. DT Q1 EBITA already gained EUR 0.8m y/y despite flat top line, and we expect the Q2 figure to have further improved by EUR 1.3m to EUR 2.7m thanks to cost savings and favorable mix as SBU has already grown to be as large as MBU. 

Growth likely to continue at least over the next year or so

SBU should continue to grow at a double-digit rate over the next year or two as there’s a long pipeline of airport investments in Europe and India, while the event security market is another source of growth especially in the US. In our view IBU still has not quite as robust an outlook as SBU even if the DTS acquisition drives TFT flat panel sales, yet the segment’s recent muted volumes mean the comparison figures are not that hard to beat. DT is likely to grow somewhat less than 10% this year as MBU remains a drag at least for H1 figures, but H2 already has an easier comparison period. We thus estimate DT to achieve double-digit growth in H2 as MBU could be able to post some improvement y/y. 

Earnings could gain by another EUR 3-4m next year

We estimate 9% growth for next year, driven by SBU while some growth should also be expected for MBU and IBU given their most recent developments and still not too demanding comparison periods. We would then expect earnings to improve by EUR 3-4m. We haven’t made significant changes to our estimates, and DT’s valuation has now increased to closer to 16x FY ‘24 EV/EBIT, however the multiples still represent around 20% discount relative to peers. Our new TP is EUR 18.5 (17.0) as we retain BUY rating.