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1. Company Snapshot

1.a. Company Description

Demant A/S operates as a hearing healthcare and audio technology company in Europe, North America, the Pacific, Asia, and internationally.It operates in two segments, Hearing Healthcare and Communications.The Hearing Healthcare segment is involved in the manufacturing, servicing, and sale of hearing aids, and diagnostic products and services.


The Communications segment provides headsets for the professional call centers, office markets, and gaming markets under the EPOS brand name.The company was formerly known as William Demant Holding A/S and changed its name to Demant A/S in March 2019.Demant A/S was founded in 1904 and is headquartered in Smørum, Denmark.

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1.b. Last Insights on DEMANT

Demant A/S's recent performance was negatively impacted by softer global demand and weaker sales to a large U.S. retailer. The company's flat organic sales in H1 and lowered 2025 forecast, citing a challenging market environment, contributed to the decline. Additionally, the Danish hearing aid maker's EBIT of 1.85 billion Danish crowns ($269 million) was not enough to offset the negative trends. The current market landscape, characterized by mixed European market performance and varied national index results, may also be affecting the company's prospects.

1.c. Company Highlights

2. Demant's Financial Performance and Strategic Outlook

Demant reported a revenue of DKK 22.4 billion for the year, reflecting a 4% growth, with 2% from organic sources and an additional 2% from acquisitions. Gross profit saw a 5% improvement, while EBIT declined by 2%. Cash flow from operations was robust at DKK 2.6 billion, with free cash flow close to DKK 2.3 billion, underscoring strong liquidity.

Publication Date: Feb -23

📋 Highlights
  • Revenue Growth:: Demant reported 4% revenue growth, with 2% from organic growth and 2% from acquisitions, reaching DKK 22.4 billion.
  • EBIT Decline:: EBIT declined by DKK 100 million, or 2%, while gross profit improved by 5%.
  • Cash Flow Strength:: The company generated strong cash flow, with DKK 2.6 billion from operations and DKK 3.5 billion in free cash flow for the full year.
  • Organic Growth Trends:: HearingCare showed strong organic growth, while HearingAids and Diagnostics faced challenges, with HearingAids losing market share in the US.
  • 2025 Guidance:: Demant expects organic growth of 3-7% and EBIT between DKK 4.5-4.9 billion, with a focus on regaining market share and leveraging AI technology.

Segment Performance

The HearingCare segment demonstrated strong organic growth across various markets, while HearingAids faced challenges, particularly in the US, due to intense competition and market share loss. Diagnostics experienced softer market conditions but still outperformed the market growth rate.

CFO Review and Operational Efficiency

René Schneider highlighted that the second half saw 2% organic growth, driven by HearingCare, with HearingAids and Diagnostics contributing negatively. Acquisitions added 3%, offset by a 1% negative FX impact. Gross profit rose 3%, though margins dipped slightly. Operating expenses grew 2% organically, with acquisitions contributing 4%, leading to a flat operating profit and an EBIT margin of 20.6%.

Cash Flow and Balance Sheet

Full-year cash flow from operations reached DKK 4 billion, with free cash flow at DKK 3.5 billion. Share buybacks amounted to DKK 2.3 billion. The balance sheet expanded 6% due to acquisitions, increasing goodwill, while net working capital decreased by 9%.

Future Outlook and Strategic Initiatives

Guidance for the upcoming year includes 3-7% organic growth and EBIT between DKK 4.5-4.9 billion. Søren Nielsen emphasized the significance of DNN technology, stating, "DNN is a technology, not a feature," highlighting its role in enhancing speech clarity. The company anticipates managed care challenges but is focused on regaining market share. The diagnostic business in China faces access issues but isn't viewed as a market weakness, with a promising pipeline and expected 5% US market growth.

Valuation and Analyst Expectations

Analysts project a 7.2% revenue growth for next year. Valuation metrics include a PE ratio of 24.14, a PB ratio of 6.09, and an EV/EBITDA of 19.95, with a free cash flow yield of 4.57%. These metrics suggest a premium valuation, reflecting confidence in Demant's strategic initiatives and growth prospects.

3. NewsRoom

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European Value Stocks Trading At Estimated Discounts

Nov -13

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European Stocks That Could Be Trading At A Discount Of Up To 49%

Nov -12

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3 European Stocks Estimated To Be Up To 36.2% Below Intrinsic Value

Oct -17

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3 European Stocks That May Be Trading At Discounts Of Up To 49.6%

Oct -17

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European Value Stocks Offering Estimated Discount Opportunities

Sep -25

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European Stocks Trading Below Estimated Value

Aug -20

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Danish hearing aid maker Demant cuts outlook after flat H1 sales

Aug -12

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.90%)

6. Segments

Hearing Aids

Expected Growth: 9%

Demant A/S's 9% growth in hearing aids is driven by increasing demand from an aging population, advancements in technology leading to improved product offerings, expansion into emerging markets, and growing awareness about hearing health. Additionally, strategic acquisitions and partnerships have enhanced the company's market presence and product portfolio.

Hearing Care

Expected Growth: 7%

Demant A/S's 7% growth in Hearing Care is driven by increasing demand for hearing aids, particularly in emerging markets, and a growing aging population. Additionally, advancements in technology, such as artificial intelligence and machine learning, are improving hearing aid functionality, driving adoption. Furthermore, government initiatives to increase accessibility and awareness of hearing health are also contributing to the segment's growth.

Diagnostics

Expected Growth: 6%

Demant A/S's diagnostics segment growth is driven by increasing demand for hearing aids, expansion into emerging markets, and strategic acquisitions. Additionally, advancements in digital technologies, artificial intelligence, and machine learning are enhancing diagnostic capabilities, further fueling growth.

Communications - EPOS

Expected Growth: 10%

Demant A/S's EPOS growth in Communications is driven by increasing demand for hearing aids and cochlear implants, fueled by an aging population and rising awareness of hearing health. Additionally, advancements in technology, such as artificial intelligence and machine learning, are improving device functionality and user experience, further boosting adoption.

7. Detailed Products

Hearing Aids

Demant A/S offers a wide range of hearing aids designed to improve communication and quality of life for individuals with hearing loss.

Diagnostic Equipment

Demant A/S provides diagnostic equipment for audiologists and hearing care professionals to assess and diagnose hearing loss.

Hearing Implants

Demant A/S offers cochlear implants and bone-anchored hearing aids for individuals with severe to profound hearing loss.

Auditory Rehabilitation

Demant A/S provides auditory rehabilitation services and tools to help individuals with hearing loss develop communication and listening skills.

Remote Care

Demant A/S offers remote care solutions for hearing care professionals to remotely adjust and fine-tune hearing aids, improving patient outcomes.

8. Demant A/S's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Demant A/S is moderate, as there are alternative products and services available in the market, but they are not significantly cheaper or better than Demant's offerings.

Bargaining Power Of Customers

The bargaining power of customers for Demant A/S is low, as the company has a strong brand and a diverse customer base, making it difficult for individual customers to negotiate prices or terms.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Demant A/S is moderate, as the company relies on a few key suppliers for critical components, but has some flexibility to negotiate prices and terms.

Threat Of New Entrants

The threat of new entrants for Demant A/S is high, as the hearing healthcare industry is attractive and has relatively low barriers to entry, making it easier for new companies to enter the market.

Intensity Of Rivalry

The intensity of rivalry for Demant A/S is high, as the hearing healthcare industry is highly competitive, with several established players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 60.96%
Debt Cost 5.14%
Equity Weight 39.04%
Equity Cost 8.51%
WACC 6.46%
Leverage 156.16%

11. Quality Control: Demant A/S passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Sectra

A-Score: 4.8/10

Value: 0.0

Growth: 8.3

Quality: 8.9

Yield: 0.6

Momentum: 5.5

Volatility: 5.3

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Medacta

A-Score: 4.8/10

Value: 0.9

Growth: 6.6

Quality: 6.8

Yield: 0.6

Momentum: 7.0

Volatility: 6.7

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Getinge

A-Score: 4.3/10

Value: 3.4

Growth: 3.8

Quality: 5.2

Yield: 3.1

Momentum: 4.0

Volatility: 6.0

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Demant

A-Score: 4.0/10

Value: 3.6

Growth: 6.8

Quality: 6.4

Yield: 0.0

Momentum: 2.0

Volatility: 5.3

1-Year Total Return ->

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LivaNova

A-Score: 3.8/10

Value: 6.2

Growth: 5.8

Quality: 4.0

Yield: 0.0

Momentum: 4.0

Volatility: 3.0

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Ambu

A-Score: 3.0/10

Value: 0.8

Growth: 5.9

Quality: 6.2

Yield: 0.0

Momentum: 2.0

Volatility: 3.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

216.4$

Current Price

216.4$

Potential

-0.00%

Expected Cash-Flows