The value of technology company Codan Ltd (ASX: CDA) soared past $10 billion recently and just kept going, after it announced a large profit upgrade.
But the team at Canaccord Genuity argues that the company's shares still represent good value, despite the strong run they've been on recently.
Image source: Getty Images
Drone warfare driving strong growth
Codan has two main divisions: military communications and metal detection. Both divisions have been performing well lately.
But it is the use of the company's technology in unmanned systems, or drones, which is translating into very rapid revenue growth.
When announcing its upgrade, the company said it expected first-half revenue in its communications division to rise 20% from the orior year.
Codan added:
Demand from conflict regions is currently exceptionally strong, reflecting the proven performance and reliability of our technology in these contested environments. With this elevated demand, Codan expects revenue generated from conflict regions to represent approximately 50% of Communications segment revenue in H1 FY27 (vs. approximately 20% in the previous corresponding period). Codan now expects the Communications segment to deliver H1 FY27 revenue of between $400 million and $410 million. This compares to $221.8 million in the pcp and $506.2 million in full year FY26.
Management said demand from conflict regions was difficult to predict over the full year, "and accordingly it is too early in the financial year to determine if demand and margin will continue at similar levels in H2 FY27.
The metal detection division (Minelab) was also performing well, driven by strong demand for its new GPZ8000 and Gold Monster 2000 detectors. This division is now expected to slightly exceed the revenue it generated in the second half of FY26.
In terms of group profit, Codan is expecting a net profit in excess of $160 million for the first half, compared to $71.2 million in the first half of FY26 and $175.2 million for the full year.
Broker says expect more to come
Canaccord Genuity said they believed Codan's forecasts would turn out to be conservative.
They said:
We believe Codan is well placed to beat full year expectations, with management's conservative second half conflict region assumptions likely to prove too cautious given no end in sight to conflicts such as Ukraine. While Codan trades on an FY27 P/E of 41x, its true forward multiple may prove well below this as further upgrades or consensus beats come through.
Canaccord Genuity said Minelab also remained a strong, high-margin business supported by elevated gold prices.
Canaccord Genuity does not publish share price targets for its top share picks.
Codan is valued at $11.9 billion, at the time of writing.
