Peel Hunt has reiterated its buy rating on discoverIE Group PLC (LSE:DSCV), the electronics engineer, with a 1,000p price target after the company announced a £50 million deal to acquire a majority stake in 3Gmetalworx, a Canadian specialist in electromagnetic and thermal management products.
The broker views the acquisition as consistent with the execution of the strategy discoverIE laid out at its capital markets day in 2024, when management signalled its intention to build exposure to defence and security end markets.
3Gmetalworx, which is based in Ontario with production facilities in Florida and California, designs and manufactures components used in electronic equipment largely for defence and security applications, serving a broad base of North American prime contractors.
The business generated sales of £14.5 million in the year to December 2025, with operating margins described as "well ahead" of discoverIE's 17% medium-term group target.
Peel estimates the deal values 3Gmetalworx at a low-teens multiple of operating profit, which it considers appropriate for a business with attractive returns in a growing end market and consistent with discoverIE's recent transaction history.
DiscoverIE is acquiring 90% of the business, with existing management retaining a 10% stake that provides ongoing alignment and an eventual buy-out path over three to five years.
The broker notes limited overlap with discoverIE's existing MTC business in terms of either products or customers, while flagging potential revenue synergies between the two operations.
This marks discoverIE's third defence-related acquisition in recent months, following the purchases of Keymat and Trival in December, both of which were pure defence and security businesses.
Pro forma leverage will rise to 2.2 times net debt to EBITDA following completion, which Peel Hunt views as temporarily elevated but within targets and likely to fall back below two times in short order.
The broker continues to see scope for organic upgrades beyond the consensus expectation of 2% organic growth, suggesting the market may be underestimating the company's momentum in defence spending tailwinds.
DiscoverIE shares have been trading around the 700p mark, implying more than 40% upside to Peel Hunt's target price.