RE: Peel Hunt raises target price significantly by 23%3 Dec 2019 13:55
New highs now - and here's the full IC tip:
"discoverIE (DSCV) secured two-thirds of its half-year revenues from its four target markets: renewable energy, transportation, medical, and industrial and connectivity. The electronics group’s design and manufacturing division is thriving in these spaces, providing more than 90 per cent of its design wins.
Three years ago, less than half of its turnover was derived from these markets. The group’s exposure to areas that are being “driven by structural changes” such as renewables, in the words of chief executive Nick Jefferies, have hardened discoverIE’s resilience to a turbulent industrial backdrop, as well as boosting its growth rates.
The remaining, non-core third of the group’s revenues are exposed to more cyclical industrial markets, Mr Jefferies admits. Custom supply work in the UK and Germany was slow. This vulnerability looks set to reduce, however. Given the trajectory of its design wins, discoverIE’s target markets could provide over 80 per cent of its turnover in three-to-five years, its chief executive contends.
The group raised £60.6m in proceeds from two placings over the period, which helped to support £74m in expenditure on three acquisitions.
House broker Peel Hunt forecasts full-year 2020 pre-tax profits and earnings per share of £33.1m and 29p respectively, rising to £37.9m and 31.7p in 2021.
IC View
With one eye on the future, returns from the group's investment in transitional technologies mightn't offer yields in line with traditional industrials, though they could represent a better long-term bet. discoverIE’s strategy is enabling it to successfully manage down its exposure to an industrial downturn, which is consuming peers like Gooch & House (GHH). The shares are already up on our October buy tip, and we think this stock remains a sensible defensive industrial buy."
Sign In
Follow the stocks
