Gooch & Housego – record Order Book and growing demand support shares of photonics group at 920p, new SQC TP of 1050p.

Ready to fly again after profit-taking

“Our strategy is focused upon us becoming an ‘innovative customer focused technology company’ making a ‘better world with photonics’ and the ‘first choice’ for all our stakeholders.”

Six months ago, I profiled the shares of Gooch & Housego (LON:GHH), the photonics technology group, then standing at 512p.

Last night they closed at 1,115p, showing a near 118% gain in the intervening period.

However, this morning the £250m-capitalised company announced its Interim Results to end-March this year and its shares have subsequently dropped nearly 18%, some 195p to 920p.

At around this level, its shares offer some positive investor appeal, especially considering the group’s record Order Book.

What Is Photonics?

Photonics is an innovative field that explores the properties of light, leveraging its dual behaviour as both a wave and a particle, known as photons.

This discipline encompasses the entire electromagnetic spectrum, though much of its practical application focuses on visible and infrared light.

Photonics has emerged as a powerful alternative to traditional electrical systems, particularly in telecommunications, where it is used for the transmission, reception, and amplification of information.

Key applications of photonics include lasers, fibre optics, sensors, and quantum computing, which utilise light's unique properties to enhance efficiency and performance.

The Business

Gooch & Housego is a photonics technology business headquartered in Ilminster, Somerset, with operations in the USA and Europe.

A world-leader in its field, the group designs, engineers and manufactures advanced photonic systems, components and instrumentation for applications in the Aerospace & Defence, Industrial, Life Sciences and Scientific Research sectors.

World-leading design, development and manufacturing expertise is offered across a broad range of complementary technologies.

The group’s 2025 Revenue was £150.5m (£136.0m).

Its Industrial & Telecom segment, covering Laser manufacturing, Photolithography, Microelectronics, Undersea networks, Perimeter sensing, Wind sensing, Laser fusion and Machine vision, made up 43% of group sales.

Aerospace & Defence, covering Navigation, Targeting & Imaging, Range finding, UAV optical systems, RF & satellite comms, Sights for AFVs, Soldier protection, and Countermeasures, represented 35%.

Life Sciences - Medical imaging, Flow cytometry, Diagnostics, Laser surgery, Ophthalmology, Aesthetic procedures, Microscopy, and Drug delivery – 22% of sales.

The group states that it is looking to benefit from recovering demand levels in its Industrial and Life Sciences markets.

The A&D business is seeing multi-year strong demand for optical systems for air, sea and land equipment.

While mindful of the increasingly uncertain macroeconomic and geopolitical landscape, G&H is well-positioned with differentiated photonics expertise aligned to growth markets that give confidence in the prospects of the company to deliver further progress in the medium-term.

Interim Results

Today, the group reported a strong first half for 2026, with revenue increasing by 15.5% to £81.9m, with adjusted pre-tax profit rising by 13.9% to £5.8m, driven significantly by a 51.7% surge in Aerospace & Defence revenue to £35.6m.

The company's order book reached a record £167.3m, providing near full cover for expected FY2026 revenue, while its net debt stood at £49.8m.

Despite some production challenges in Life Sciences, the company maintained its full-year expectations and remains confident in achieving mid-teens returns over the medium term, while declaring an unchanged interim dividend of 4.9p per share.

Management Comment

CEO Charlie Peppiatt stated that:

"I am pleased with the positive progress that G&H has made in the first half of the financial year.

The record order book growth in the period demonstrates the increased confidence our customers have in G&H to provide them with their most complex photonics and optical systems requirements.

This enlarged order book gives us stronger forward visibility than we have had historically and reflects the benefits of our strengthened positions in structurally attractive end-markets.

We remain focused on converting this demand through disciplined capacity expansion, improved operational execution and continued supply-chain resilience.

The strategic actions taken over the last few years, including important speed-to-value acquisitions, have started to translate into improved financial and operational performance, and the Group is well-positioned to meet this increased demand.

While we continue to navigate the significant macroeconomic uncertainties, the recovery in our Industrial and Semiconductor markets, coupled with record demand from US and European Aerospace and Defence sectors, firmly supports our path to achieving mid-teens returns over the medium term."

The Equity

There are some 27.37m shares in issue.

The larger holders include Octopus Investments (14.92%), Odyssean Capital (12.06%), Schroders (6.68%), Fidelity Worldwide Investment (6.66%), Gan Atid USA (4.65%), JM Finn & Co (3.74%), Canaccord Genuity Group (3.18%), and Hargreaves Lansdown Asset Management (3.13%).

Broker Views

Analyst David Buxton, at Cavendish Capital Markets, rates the shares as a Buy.

For the current year to end-September, he estimates sales of £175.3m (£150.5m), with adjusted pre-tax profits of £16.2m (£11.9m), earnings of 45.9p (34.6p) and paying a maintained 13.2p per share dividend.

For 2027, he looks for £182.7m sales, £19.5m profits, 54.3p earnings and an increased 13.8p dividend.

Analysts Henry Carver and Caroline de La Soujeole, at Singer Capital Markets, noted that:

“Whilst much of the growth has been driven by defence, there are also now clear signs that the semiconductor manufacturing market is also in recovery.”

Analyst Robin Byde, at Zeus Capital, recently raised his Buy Target Price for the group’s shares from 700p to 950p.

For the 2028 trading year, he goes for £216.0m revenues, £22.2m profits, with 60.7p earnings and a 14.0p dividend per share.

My View

The group’s shares, now at 920p, have enjoyed an excellent move of late, so it may well be sensible to anticipate some more profit-taking after the figures, which could provide useful buying opportunities for investors wanting to play the stock.

However, with a record Order Book and growing demand, the group’s shares offer upside prospects.

Accordingly, SQC Research now sets a new Target price of 1050p per share.

(Profile 09.12.24 @ 490p set a Target Price of 600p*)

(Profile 11.10.25 @ 586p set a Target Price of 680p*)

(Profile 02.06.26 @ 920p set a Target Price of 1050p)