Focus on market outlook and situation in China
Our focus in the Q2 result will be on management’s comments on the outlook for both security and medical imaging markets, as well as hearing the latest developments in China. DT has indicated that it expects healthy demand in MBU for Q2 and H2, whereas SBU sales are expected to decrease in Q2 and FY20. Looking at other industries, we note that Chinese market has been first to recover after the pandemic resided. That said, there is still a lot of uncertainty related to aviation, which is a crucial part of DT’s security business, accounting for roughly 2/3 of DT’s net sales. DT saw positive signs in demand for medical CT solutions at the end of Q1 (after a slowdown around end of 2019), stemming from CT imaging being used to detect pulmonary changes caused by the COVID-19 virus, as well as diagnosis and treatment of patients.
DT’s share price has been lagging the market, we see investment case intact
DT’s share price is YTD -23% vs. -5% HEX25, and since mid-March +26% vs. +41% HEX25. We see this relating to SBU’s exposure to aviation segment. Although 2020e will be challenging, we see DT well positioned to weather out the storm and its competitive position with its new products remaining good, thus investment case is intact. We maintain our target price of 22 euros and BUY recommendation ahead of the Q2 result.
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