CDA outperformed across all its business units in 1H17, with the Minelab division delivering returns above expectations on improved sales of the GPZ 7000. The company has continued to deliver earnings growth since the significant decline in earnings experienced in FY14 after the unprecedented increase in FY13 on the back of a ‘gold rush’ in Africa. With the company forecasting net profit of ~$35m for FY17, the company is in sight of FY13 earnings.
We have revised our target price for CDA up to $2.24 from $1.56 per share in our report published in August 2016. This represents a 5.5% discount to the share price at 7 March 2017. The revised target price comes on the back of the company surpassing expectations in the 1H17. We view the improved earnings to be reflected in the current share price, with the company surpassing our target price. We are expecting the momentum of GPZ 7000 sales to continue in the 2H, given this is typically the stronger half for Minelab sales.