Codan (ASX:CDA) Takes Off, 30% Rally on Strong Half-Year Update

Codan Finds Its Signal

Over the past week, Codan Limited (ASX:CDA) has surged by around 30%. For a company with a market capitalisation above A$5 billion, this represents a meaningful re rating by the market. Today’s trading update helps explain why.

Codan reported group revenue of A$394 million, up 29% on the prior period, indicating that strong growth momentum is continuing. Importantly, profitability is also accelerating, with cash conversion improving and NOPAT now expected to reach A$70 million, up 52%.

The combination of revenue growth and rising profitability suggests the business is scaling efficiently rather than simply growing for growth’s sake. Codan is scheduled to release its full H1 FY26 results on 19 February, and this is an announcement investors will want to watch closely given the clear shift in market expectations.

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Upgraded Profit Guidance

The metal detection segment delivered a very strong result, with revenue of A$168 million, up 46%. This growth was driven primarily by Africa, a region we have covered extensively and one that, outside of China, hosts some of the largest and most prospective commodity deposits globally.

Strong gold detector sales across Africa were complemented by double digit growth in key rest of world recreational markets, highlighting broad based demand rather than reliance on a single geography.

The communications segment also performed well, generating A$222 million in revenue, up 19%. For investors, this is a clear signal that Codan continues to reinvest effectively while still delivering solid double digit growth into H1 FY26.

Importantly, the company is now demonstrating meaningful earnings leverage, with underlying NPAT growing materially faster than revenue. This tells us operating leverage within the business is strengthening, reflecting management’s progress in restructuring and improving profitability.

If this trajectory continues, it should translate into stronger cash flows over the full year, which is ultimately what matters most for shareholders.

Growth With Signal Strength

If we step back and compare H1 FY26 to the full year FY25, the scale of this performance becomes clearer. Group revenue in the first half is already around 58% of FY25 revenue, while the metal detection segment alone has reached roughly 66% of its prior full year level.

This strongly suggests that metal detection is emerging as the key driver of value across the group. The update reinforces that growth has been led by gold detector sales in Africa, supported by solid demand across recreational markets.

With commodities acting as a structural tailwind amid ongoing geopolitical uncertainty, and Codan’s distribution and execution in Africa appearing well established, the growth backdrop remains supportive.

What is consensus telling us about Codan’s valuation

Looking ahead, consensus expectations point to full year revenue of around A$788 million. Based on available forecasts, seven analysts currently rate the stock a buy, with an average target price near A$30 per share.

That said, much of this upside now appears reflected in the share price following the recent re rating. Prior to the rally, Codan looked reasonably valued on an EBITDA PEG style basis, while appearing more demanding on a P/E multiple.

After the sharp move higher, the stock screens as more expensive on both measures, suggesting that while the fundamentals remain strong, valuation discipline becomes increasingly important from here.