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 it is 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.
The new financial year got off to a solid start with sales in the first half up by 9% year-on-year on a constant exchange rates (CER) basis.
Like-for-like (LFL) sales on a CER basis were up by 6% in the second quarter, accelerating from the 4% growth in the first quarter and cranking up the half-year growth rate to 5%.
What the brokers say
Peel Hunt has a 'buy' recommendation on the shares and a target price of 500p. With the shares trading at around 411p, based on Peel Hunt's forecasts for the current fiscal year the stock trades on a price/earnings ratio (PER) of 14.3; the PER falls to 13.6 based on the broker's fiscal 2021 forecasts. The shares yield 2.5% based on Peel Hunt's projected dividend for the year.
Peel Hunt is forecasting adjusted profit before tax for the current fiscal year of £31.2mln, which is below the consensus forecast of £31.8mln. It is tipping organic sales growth this year will be around 2.9%, augmented by a 4% contribution from acquisitions, Hobart and Positek, both of which are bedding down nicely.
"Design & Manufacturing continues to drive the growth, partly because it is more exposed to the four key target markets than Custom Supply," Peel Hunt said.
"This is an excellent H1 [first half] performance and should give plenty of comfort around DSCV’s FY [full-year] expectations in a sector that is looking increasingly varied and uncertain," the broker said.