Codan Drone Communications Boom Turns a Metal Detector Maker Into an ASX Tech Leader

Surging demand for drone radios has lifted Codan's growth targets, leaving fund managers to weigh momentum against a premium valuation.

7 Oct 2026 · 7 min read

Codan has entered FY27 with its fastest growth yet, and fund managers say the engine has shifted decisively toward drone communications. Pendal Group's October 2026 Newsletter reported that Codan guided first-half FY27 net profit after tax to at least $160 million, up more than 120% on the prior corresponding period and compared with about $175 million for the whole of FY26. Pendal said that while all segments were tracking ahead of expectations, the upgrade was largely attributable to accelerating demand for radio communications equipment from the unmanned aerial systems sector, particularly in conflict regions in Eastern Europe.

Pendal said Communications revenue is now expected to grow more than 80% in the first half, with management targeting 30-40% growth in FY27 compared with original guidance of 20%, and with operating leverage and mix driving significant margin expansion. Pendal also flagged the main uncertainty: demand in conflict zones is difficult to predict beyond three months. It added that the company appears to be winning market share and that growth outside those regions has also been relatively strong at around 20%.

Centennial Asset Management described Codan in an October 2026 article as a world leader in gold detectors, a key player in emergency services communications and "at the cutting edge of unmanned drone communication systems." Centennial noted that since Alf Ianniello joined as CEO in early 2022, profits have almost doubled, and that Codan's market capitalisation of more than $12 billion makes it the largest technology stock on the ASX. In a separate October 2026 article, Centennial pointed to the company's strong positioning in the unmanned communications market. "We expect new product applications to support increasing demand from defence customers," Centennial said.

We expect new product applications to support increasing demand from defence customers.

— Centennial Asset Management, Article, October 2026

From metal detectors to mission-critical communications

Codan's transformation has been building for years. Maple-Brown Abbott said in an October 2025 article that it bought into Codan two and a half years earlier, after a downgrade cycle and political unrest in key African detector markets, because it liked the communications half of the business. Maple-Brown described those products as "niche products, high margin, low competition, good structural growth tailwinds." In a May 2026 article, Maple-Brown said what began as an Adelaide-based metal detector maker "has quietly evolved into a global provider of advanced communications solutions across military, unmanned systems, broadcast and law enforcement."

The FY26 result showed how far that shift has come. Centennial Asset Management's August 2026 Monthly Report said revenue increased 30% and net profit grew 69%, with group EBIT margins expanding from 21.7% to 27.9%. The Communications orderbook reached $380M at 30 June, up 50% from a year earlier. Centennial's October 2026 article added that Codan raised its dividend and moved to a net cash position, with revenue and earnings compounding at 16% and 18% a year respectively since 2020.

The communications margin story had already accelerated earlier in the year. Eiger Capital's April 2026 Monthly Report said the communications segment hit its 30% margin target a full year ahead of schedule, driven by structural demand in defence-linked software-defined radios. Ausbil Investment Management said in April 2026 that operating momentum and execution were impressive, with Communications margins exceeding expectations 12 months early, and that it saw further positive earnings revisions, with accretive M&A as potential optionality over the medium term.

Ophir Asset Management explained the defence logic in a May 2026 article. Ophir said Codan produces communication systems used with drones and argued that militaries around the world now understand the disparity between a $50,000 drone and an aircraft carrier. "Everyone's building up the drones. So, they'll benefit from there," Ophir said. Ten Cap had made a similar observation in a December 2025 article, saying the communications business had played right into the defence thematic as countries increased spending.

Longwave Capital's June 2026 Newsletter noted that around 95% of Codan's sales are generated outside Australia, with offshore revenue growing ~25% in FY25 versus ~5% in Australia, making the company's growth profile far more tied to international security, defence and resource-end-market demand. 1851 Capital, which named Codan its standout presentation at a May 2026 conference, highlighted a related point. "We think their outlook is incredibly strong and the beautiful thing about Codan is it's not related to what interest rates do," 1851 Capital said.

We think their outlook is incredibly strong and the beautiful thing about Codan is it's not related to what interest rates do.

— 1851 Capital, Article, May 2026

Minelab and the gold price add a second engine

Metal detection remains the second pillar of the thesis. Wilson Asset Management's January 2026 Monthly Report said the first-half FY26 trading update showed group revenue of $394 million, including approximately $168 million from metal detection, primarily gold detector sales in Africa, and said it remained positive on the outlook given defence sector and gold price tailwinds. Ausbil Investment Management said metal detection revenue grew 46%, coinciding with record gold prices. Ellerston Capital noted in January 2026 that the Metal Detection monthly run-rate of $31m was 24% higher than Codan's recent AGM guidance.

Ophir Asset Management expects new products to extend that run. "They've got a whole new suite of gold detectors. All our channel checks show that this is an absolute game change," Ophir said in its May 2026 article, adding that it expects Codan to "really surprise the market" with sales of its Gold Monster 2s and its higher-priced GPZ detector. LSN Capital Partners' March 2026 Presentation similarly pointed to Minelab upside from new products, and Alphinity Investment Management said in a March 2026 article that it saw room for growth in an era of increased military spending. "We think the earnings are underestimated," Alphinity said.

The gold link is also the main cyclical risk managers flag. Atlas Funds Management said in a December 2025 article that detector sales into West Africa have historically been very correlated with the gold price, and that a fall-off would remove some of the "icing on the cake" from Codan's earnings. Montgomery Investment Management, by contrast, said in January 2026 that it liked Codan as a second-line gold exposure that also carries defence exposure.

Valuation is the main point of debate

Few managers dispute the quality of the business; the disagreement is over price. Investors Mutual Limited rated Codan a hold in a May 2026 article, calling it a fantastic business and saying it is hard to find "two hotter exposures right now than drones and gold mining." IML nonetheless said: "For us, 40 times earnings is just a little bit rich for a business that doesn't have much in the way of recurring revenue." Hayborough Investment Partners also rated Codan a hold, saying the stock sat somewhere between a buy and a hold but was richly priced.

For us, 40 times earnings is just a little bit rich for a business that doesn't have much in the way of recurring revenue.

— Investors Mutual Limited, Article, May 2026

Yarra Capital Management, which is underweight, said in its April 2026 Monthly Report that it preferred peers Imdex and Chrysos and noted that the valuation assumed continued strong growth. On the other side, Ausbil Investment Management acknowledged that Codan's valuation multiple has rerated significantly, but argued that its earnings and growth outlook have rerated with it. Centennial Asset Management's Kidman said in a June 2026 article that for premium-valued holdings including Codan, it was all about earnings momentum and expectations for now.

What managers are watching next

Managers' attention now centres on the durability of drone-related demand. Pendal Group's caution that conflict-zone demand is hard to forecast beyond three months sits alongside its observation that Codan appears to be gaining share and growing around 20% elsewhere. Centennial Asset Management is watching new product applications in unmanned communications, while Ophir Asset Management and LSN Capital Partners are focused on Minelab's new product cycle.

Capital allocation is the other thread. Ausbil Investment Management believes Codan's aspiration for M&A is still alive but expects management to remain disciplined, and LSN Capital Partners has pointed to the balance sheet as capacity for further accretive acquisitions. For the valuation-conscious holders such as Investors Mutual Limited and Hayborough Investment Partners, the question is whether earnings keep rising fast enough to support the multiple.