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Sticking to target markets is paying off for specialist electronic engineer
Thursday 10 Jun 2021 Author: Ian Conway

DiscoverIE Group (DSCV) 854p

Gain to date: 42%

Original entry point: Buy at 600p, 10 December 2020

Shares in specialist electronics maker DiscoverIE (DCSV) continue to power ahead following an increase in earnings guidance in April and a positive pre-close trading update at the start of this month.

Thanks to the firm’s focus on specific markets, sales for the full year were down just 3% as orders saw a strong second-half rebound, while organic revenue growth turned positive in February and March.

Demand was resilient in Asia, especially from customers in the renewable energy sector, and while US demand was lower as Covid led to slowdown in spending in the transport sector, president Biden’s huge infrastructure programme has prompted customers to increase their orders again.

The firm made another bolt-on acquisition in the US high-performance switches and sensors market, yet thanks to strong cash generation still reduced its gearing and increased its full year dividend.

The current financial year has started with a record order book which continues to grow faster than sales, providing excellent visibility, and margins continuing to improve thanks to cannier purchasing and tight control of operating costs.

Analysts at Peel Hunt and Shore Capital raised their pre-tax profit forecasts again for the next two years, while Stifel – whose forecasts were already ahead of consensus – expect to have to raise theirs along with the consensus.

SHARES SAYS: The stock is benefiting from mega-trends in transport and renewables and we remain fans 

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