Codan (ASX CDA) – Defence Growth and Minelab Tailwinds
Codan (ASX: CDA) is a technology company riding two powerful tailwinds simultaneously. Its Unmanned Systems business within Communications has grown over 100% in FY25 and is on track to become the division’s largest unit by FY28, supported by NATO countries increasing defence budgets toward 5% of GDP. Meanwhile, Minelab is capitalising on a 67% surge in gold prices and new product launches that are driving Africa Gold revenue up 111%. With a 3-year NPAT CAGR of 27%, a Comms orderbook of A$294m, and A$290m in acquisition capacity at just 0.4x leverage, the 12-month price target of A$38.50 implies 11% upside.
Research published 22 February 2026. Price target and upside based on prices at time of publication.
About Codan
Codan Limited (ASX: CDA) is an Adelaide-headquartered technology company operating two divisions that serve very different end markets but share a common thread of technical leadership. The Metal Detection division houses Minelab, the global leader in both consumer and professional metal detectors with dominant market share across hobbyist gold prospecting and commercial mining applications. The Communications division encompasses a growing portfolio of defence and public safety businesses including DTC tactical radios, Zetron dispatch infrastructure, Kagwerks body-worn cameras, and a rapidly scaling Unmanned systems unit. Listed on the ASX with a market capitalisation of approximately A$6.3 billion and an enterprise value of A$4.5 billion, Codan has transformed itself from a niche detector business into a diversified technology platform with serious defence credentials.
Why We Like CDA at Current Levels
Codan is one of those rare situations where both sides of the business are firing at once. Minelab is riding an extraordinary gold price tailwind with new products accelerating revenue, while the Communications division is benefiting from a structural uplift in global defence spending that has years to run. At A$34.69, the stock trades on approximately 34x FY27 earnings, which looks full at first glance. But when you consider a three-year NPAT CAGR of 27% and improving returns on equity pushing toward 29%, the growth-adjusted valuation starts to look far more reasonable.
The 12-month price target of A$38.50 implies 11% upside from current levels. That target is derived from a 50/50 blend of DCF analysis at A$38.12 (using an 8.7% WACC and 3.5% terminal growth rate) and a sum-of-the-parts framework at A$38.92 based on 26x time-weighted FY26/27 EV/EBITDA. We think that framework is well supported given the growth trajectory and the quality of earnings across both divisions.
Unmanned Systems Is the Standout Growth Engine
The story within Codan that deserves the most attention right now is Unmanned. This business unit grew revenue by more than 100% in FY25 to A$100m, then followed up with another 68% growth in the first half of FY26 to A$73m. At this pace, Unmanned is expected to become the largest business unit within the Communications division by FY28, with a three-year CAGR of 32% through to FY28.
What is driving this is structural rather than cyclical. NATO countries are increasingly committing to defence budgets of 5% of GDP, up from the previous 2% target that many members were already failing to meet. If fully implemented, that would represent a roughly 90% increase in total NATO defence budgets. Unmanned systems sit at the intersection of several priority areas for western militaries, including reconnaissance, electronic warfare, and force multiplication. The Comms orderbook reflects this momentum, sitting at A$294m and growing 19% year on year.
The broader Communications division has guided for 15-20% revenue growth in FY26, with management reiterating that target at the most recent update. The medium-term margin target of 30% (expected to be achieved in FY27, sustained in FY28) suggests significant operating leverage as the division scales. Current PBT margins of around 27% in FY26 leave clear room for expansion as higher-margin revenue streams like Unmanned become a larger share of the mix.
Minelab Riding the Gold Price Wave
Minelab has always been a quality business, but the current environment is as favourable as we have seen. The gold price has risen approximately 67% since February 2025, and that feeds directly into demand for both consumer hobby detectors and professional prospecting equipment. Africa has been the standout geography, with Gold revenue in that region up 111% to approximately A$95m. This is not just a price effect. Minelab has been investing in distribution channels across African markets for years, and the combination of higher gold prices and improved market access is delivering outsized results.
First half FY26 revenue for the Metal Detection division accelerated to 46% growth, with PBT margins expanding to 45.4%. To put that margin in context, this is a consumer electronics business earning software-like profitability. The margin expansion is being driven by operating leverage on fixed costs as volumes scale, and by a product mix shifting toward higher-end detectors.
On the product pipeline, management expects to release 4-6 new products across FY26 and FY27, including the Gold Monster 2000 which is scheduled for release in the second quarter of calendar 2026. New product development has historically been a strong catalyst for Minelab, as each generation of detector tends to expand the addressable market by making detection easier and more accessible to new users. Rest of World revenue grew 18% despite a mixed consumer backdrop, which speaks to the underlying brand strength and market position.
The Metal Detection division is expected to generate FY26 revenue of approximately A$356m, up from A$262m in FY25, with PBT margins expanding from 32% in FY25 to 39% in FY26 and potentially reaching 45% by FY28.
Financial Profile
The group-level numbers paint a picture of a business that is accelerating across every meaningful metric:
- Revenue is expected to grow from A$674m in FY25 to A$838m in FY26 (up 24%), then A$961m in FY27 (up 15%) and A$1,074m in FY28 (up 12%)
- EBITDA is forecast to rise from A$183.7m in FY25 to A$251.3m in FY26, with margins expanding from 27% to 30% and continuing to improve through FY28 at 31.4%
- NPAT is expected to grow from A$103.5m in FY25 to A$151.4m in FY26, A$184.6m in FY27, and A$212.4m in FY28
- EPS roughly doubles from A$0.57 in FY25 to A$1.17 in FY28
- ROE improves from 21.3% in FY25 to 27.0% in FY26 and peaks at around 28.7% in FY27
- Free cash flow grows from A$84.2m in FY25 to A$125.9m in FY26 and A$150.3m in FY27
The dividend yield is modest at 1.2% for FY26, rising to 1.7% by FY28. This is clearly a growth story rather than an income play, and we think the capital is far better deployed in the business at current returns on equity than it would be sitting in shareholders’ pockets.
Balance Sheet and Acquisition Capacity
One of the underappreciated strengths of the Codan story is the balance sheet. Net leverage sits at just 0.4x, and the company has approximately A$290m in available capacity comprising A$140m in undrawn facilities and A$150m in additional headroom. That positions Codan well to continue its disciplined acquisition strategy without needing to raise equity.
The most recent acquisition, Kagwerks (body-worn cameras for law enforcement), is tracking to expectations with revenue in the A$49-57m range. Management has a strong track record of acquiring complementary businesses that plug into existing defence and public safety channels, and the current balance sheet means they can continue to be opportunistic without stretching.
Valuation
We acknowledge the stock is not cheap on headline multiples. At approximately 37.8x next-twelve-month earnings, Codan trades well above its historical average of around 18.7x. However, we think that re-rating is justified by a fundamental step-change in the growth profile of the business.
The blended EV/EBITDA of 25x used in the valuation framework reflects a 26x multiple for the Communications division (a 30% premium to public sector and defence peers) and 22x for Metal Detection (a 35% premium to consumer outdoor and electronics peers). Those premiums look reasonable when you consider the growth differential:
- Codan’s three-year EPS CAGR of 26% per annum compares to approximately 11% for Communications peers and 14% for Metal Detection peers
- The Unmanned business alone is growing at a 32% three-year CAGR and is not yet fully reflected in comparable company valuations
- Minelab’s margin expansion from 32% to a potential 45% by FY28 provides earnings upside even if revenue growth moderates
Institutional research from Goldman Sachs supports the Buy rating, and we agree with the view that Codan’s premium to peers is earned rather than speculative given the demonstrated execution across both divisions.
Key Risks
There are genuine risks to consider. Geopolitical instability in Africa remains a concern for Minelab, particularly given the scale of the African gold revenue contribution. Any deterioration in security conditions or changes to artisanal mining regulations could impact demand in a geography that has been a significant driver of growth.
On the Communications side, government procurement cycles can be lumpy and unpredictable. Zetron in particular is exposed to US municipal and state budget cycles that can create revenue volatility from quarter to quarter. The elevated Comms orderbook provides some visibility, but conversion timing is never guaranteed.
Gold price volatility works both ways. While the current gold price environment is highly favourable, a meaningful pullback would slow demand for prospecting equipment, particularly in Africa where much of the activity is driven by small-scale artisanal miners sensitive to the economics of manual extraction.
Finally, acquisition integration risk and elevated stock-based compensation are worth monitoring, though neither is at levels we consider problematic today.
Our View
Codan represents a compelling growth story on the ASX. The combination of a structurally growing defence business with an expanding addressable market in unmanned systems, and a gold detection franchise operating in the most favourable commodity environment in years, is difficult to replicate elsewhere on the exchange. The business is generating improving returns on equity, has a conservatively geared balance sheet with meaningful acquisition capacity, and is run by a management team that has consistently delivered on its guidance.
At A$34.69, the 11% upside to the price target may not look dramatic, but we think the risk-reward is attractive when you factor in the earnings growth trajectory and the potential for further re-rating as the Unmanned business scales. For investors with a 12 to 18 month horizon who are comfortable owning a premium-multiple growth stock, Codan deserves a place on the watchlist.
If you would like to discuss Codan or how it might fit within your portfolio, request a callback or call us on 1300 889 603.
