Codan Ltd (ASX: CDA) shares were on fire again on Friday.
The metal detector company's shares ended the session 8% higher at $28.34.
This means that its shares are now up 20% in the space of just two days following the release of its full year results.
Does this make it too late to invest? Let's see what Bell Potter is saying about this stock.
What is the broker saying?
Bell Potter doesn't appear surprised to see Codan shares rocket following the release of its full year results.
It notes that the company delivered a result well ahead of the market's expectations. It said:
CDA recorded FY25 group revenue of $674.2m (+22% YoY) ahead of both BPe (+7%) and VA consensus (+5%). Comms segment revenue ($413.5m) grew 26% YoY (BPe 21%), including organic revenue growth of 19%, well above the targeted range of 10% to 15%. Metal detection revenue ($258.4m) grew 16% YoY and 21% HoH, which was a major surprise considering management had previously flagged a 2H result similar to the 1H.
Group EBIT of $146.0m (+28% YoY) was again ahead of BPe/consensus and NPAT ($103.5m) grew 27% YoY. This strong performance delivered diluted EPS of 57.1c and a full-year dividend of 28.5c. CDA had a cash balance of $39.7m at 30-Jun25, and the net-debt position reduced to $78.3m.
A key driver of this outperformance was its unmanned systems (drones). This was supported by strong demand for metal detectors in Africa. It adds:
A key factor in CDA's strong performance was DTC's unmanned systems, which delivered ~$100m in revenue during FY25, more than double the FY24 result. Further, Minelab Africa sales rebounded to grow 54% vs 1H25 on the back of improved market conditions, with political instability in the region a key risk to Minelab performance. The growth in these areas more than offset slightly lower growth in the Zetron business than we forecast.
Should you buy, hold, or sell Codan shares?
According to the note, the broker thinks that Codan shares are fully valued following its strong run.
This morning, Bell Potter retained its hold rating and lifted its price target materially to $27.80 (from $17.25). This is largely in line with where its shares are currently trading.
Commenting on its hold recommendation,
We have upgraded our revenue forecasts in-line with outlook targets of FY26 comms growth of 15% to 20% and longer-term segment growth of 10% to 15%. We now forecast FY26 group revenue of $772.6m (+14.5% YoY), EBIT of $182.9m and NPAT of $131.2m. Our EPS changes are +19%/+14%/+13% in FY26/FY27/FY28.
We have reduced the WACC we apply in the DCF to 9.7% and increased our EV/EBIT multiple to 30.0x to reflect the positive outlook and increasing defence exposure. Our updated PT of $27.80 is a <15% premium to the current share price so we retain our HOLD recommendation.
