Senetas Corporation Limited (ASX:SEN) experienced a return to growth in the first half of fiscal 2018 as key customers recommenced normal ordering patterns.
Senetas also delivered first sales of its new 100 gigabytes per second encryptor, which was made to a European customer through Gemalto, its global distribution partner.
The net profit of circa $1.6 million was up 90% on the previous corresponding period and slightly ahead of consensus forecasts of $1.5 million.
Sale of encryption products expected to grow rapidly in 2019
While the company has a broad spread of interests across the IT sector, it has been particularly successful as a developer of data encryption solutions.
These target the government and small to medium enterprise market segments, areas where regulatory reform is placing an increased emphasis on data security.
Momentum from this area is expected to continue to drive earnings in the second half of fiscal 2018.
Virtualised encryption expected to surge in 2019
Looking to the medium-term, Senetas is expecting a substantial uptick in the use of virtualised encryption and the use of its 100 gigabytes per second encryptor.
Management is also anticipating demand for its customised algorithm products.
From an industry perspective, the virtualised networking market is expected to mature with increased functionality and a growing prominence in virtualised networks.
Bell Potter forecasting strong earnings growth
Analysts at Bell Potter are forecasting earnings per share growth of circa 23% in fiscal 2018 with sustained momentum through to fiscal 2020.
Leading up to the result, the broker had a buy recommendation on the stock with a 12-month price target of $0.13