Why fund managers are still backing Codan's defence and gold detection earnings run
Communications and metal detection group Codan keeps beating guidance, but some managers say the multiple has run ahead of a business with limited recurring revenue.
30 Jun 2026 · 5 min read
In short
Codan generates around 95% of its revenue outside Australia, with growth led by global defence communications and Minelab gold detector sales in Africa.
Management has guided FY26 EBIT to roughly $235 million and net profit to about $170 million, a 10-11% beat versus consensus, according to Ellerston Capital.
Some managers, including Investors Mutual Limited and Yarra Capital Management, rate Codan a hold or underweight given a valuation near 40-47 times earnings.
Communications and metal detection group Codan has been one of the standout performers among small industrials, with Longwave Capital's June 2026 Newsletter noting around 95% of its revenue is now generated outside Australia, growing roughly 25% in FY25 versus only 5% domestic growth, driven by global defence communications, unmanned systems and Minelab's African gold detector demand.
Two businesses, one cycle
Ausbil Investment Management has tracked Codan's earnings upgrades closely through the period, describing a +33.3% monthly return in April 2026 as operating momentum accelerated across communications, where margins had already exceeded expectations twelve months ahead of schedule. Ellerston Capital's April 2026 Monthly Report detailed management guiding to FY26 EBIT of roughly $235 million and net profit of about $170 million, a 10-11% beat against consensus, following a strong trading update. LSN Capital Partners has framed the growth story around margin expansion, noting NPBT margins had reached 20.6%, up 1.3 percentage points year on year, with communications revenue up 26% on continued defence sector tailwinds.
We think the earnings are underestimated, highlighting Codan's capacity for growth in an era of increased military spending.
— Alphinity Investment Management, Article, March 2026
Not all managers are convinced the valuation still leaves margin of safety. Investors Mutual Limited's May 2026 Article called Codan a fantastic business but rated it a hold on valuation grounds, at around 40 times earnings for a business it noted does not have much recurring revenue. Yarra Capital Management has held an underweight position for similar reasons, preferring peers Imdex and Chrysos given Codan's FY26 price-to-earnings multiple of around 47 times.
What managers are watching next
With gold prices at record highs supporting Minelab and global defence budgets continuing to expand, 1851 Capital's May 2026 commentary described Codan's outlook as incredibly strong and largely insulated from interest rate movements, while Centennial Asset Management continues to hold the stock as one of its core AI-adjacent, defence and electrification exposures despite acknowledging the premium multiple the market is now paying for that earnings momentum.
Questions
What is driving Codan's earnings growth?
Fund managers point to two drivers: strong global defence spending boosting Codan's communications division, and record gold prices supporting demand for its Minelab metal detection products, particularly in Africa.
Is Codan still good value for fund managers?
Opinions are split. Managers such as Alphinity Investment Management and 1851 Capital remain bullish on earnings momentum, while Investors Mutual Limited and Yarra Capital Management rate the stock a hold or underweight given its valuation of around 40 to 47 times earnings.
How much of Codan's revenue comes from overseas?
According to Longwave Capital, around 95% of Codan's revenue is generated outside Australia, with offshore revenue growing about 25% in FY25 compared with only around 5% domestic growth.
21 managers, 49 comments, with each manager's latest recorded position.
See CDA