Designs, manufactures and supplies innovative components for electronics applications
Key markets in renewable energy, transportation, medical and industrial connectivity
Full-year underlying pre-tax profits up 24%
Record order book of £139mln
What discoverIE does:
discoverIE Group PLC (LON:DSCV) designs, manufactures and supplies highly differentiated, innovative components for electronics applications.
The group – which changed its name from Acal in 2017 - provides application-specific components to original equipment manufacturers (OEMs) internationally using its in-house engineering capability.
It focuses on key markets which are driven by structural growth and increasing electronic content, namely renewable energy, transportation, medical and industrial connectivity.
It employs around 4,000 people and its principal operating units are located in Continental Europe, the UK, China, Sri Lanka, India and North America.
How’s it doing:
In its results in June, the company upped its final dividend following a strong uplift in full year profits.
The firm reported an underlying pre-tax profit for the year ended 31 March of £27.2mln, 24% higher than the year before, while revenues climbed 13% to £438.9mln.
Organic sales and orders grew by 8% during the year, with cross-selling revenues up 20% at £10.6mln.
Underlying operating margins also increased to 7% from 6.3% in the prior year, with the group’s design & manufacturing division now accounting for 61% of sales, compared to 57% in the prior year, following a 10% uplift in sales from the segment.
As a result of the improved performance, the final dividend was hiked by 6% to 6.75p per share, taking the full year payout to 9.55p.
Looking ahead, the company said it had ended the year with a record order book of £139mln and that trading in its current financial year had “started well” with several acquisition opportunities developing.
Nick Jefferies, discoverIE’s chief executive, added that the group was “well positioned” to progress and over the last eight months had made three “high quality, higher margin” acquisitions to help grow its business.
What the broker says
In a note commenting on the full year results, analysts at discoverIE’s ‘house’ broker finnCap reiterated their 535p target price on the firm saying the “impressive” results provided further evidence that the company’s focus on structurally growing markets and its consolidation of a highly fragmented market would continue to drive growth, cash flow and a higher return of capital employed.
Fellow broker Peel Hunt was similarly upbeat, saying the company remained one of their “top picks” in the sector and reiterated their 500p target price and ‘buy’ rating.
In another note issued on 12 June by Numis, analysts upped their target price for the firm to 530p from 500p and retained an 'add' rating, saying that the company's strong order book growth and recent trends in its target markets indicated that it was well-placed to continue its "strong growth trajectory" despite "macro uncertainty".
Numis added that, based on a share price of 458p, discoverIE's stock was "attractive" given the growth opportunities available for the firm.
With the shares trading at around 449p as of 12 June 2019, discoverIE has a market cap of £369.5mln.