ReSound Vivia's Advanced AI Features Will Strengthen Market Position

Key Takeaways

• The one-GN transformation initiative and SteelSeries integration are enhancing efficiencies and margins, supporting earnings growth.
  
• Innovative product launches and market share gains in key divisions position GN Store Nord for sustainable revenue and profit growth.
  
• Geopolitical risks, foreign exchange volatility, and intense competition pose challenges to GN Store Nord's revenue growth, market share, and financial stability.

Catalysts

Provides hearing, audio, video, and gaming solutions in Denmark, rest of Europe, North America, and internationally.

• GN Store Nord's one-GN transformation initiative has led to significant synergies, streamlining operations and improving efficiencies, which is expected to enhance net margins.
  
• The launch of innovative products such as ReSound Vivia with advanced AI features suggests strong potential for growth in the Hearing division, which should positively impact revenue.
  
• The integration of SteelSeries operations with Enterprise systems is anticipated to deliver further margin improvements, supporting earnings growth.
  
• Continued market share gains and expansion in the Enterprise division, especially in video, along with an improving market sentiment, are expected to drive revenue and profit margins.
  
• Focus on leveraging technological advancements, such as next-generation connectivity features and AI, positions GN Store Nord for sustainable growth and long-term earnings potential.

GN Store Nord Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming GN Store Nord's revenue will grow by 5.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.5% today to 9.1% in 3 years time.
• Analysts expect earnings to reach DKK 1.9 billion (and earnings per share of DKK 13.58) by about February 2028, up from DKK 988.0 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as DKK2.3 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.5x on those 2028 earnings, down from 21.2x today. This future PE is lower than the current PE for the GB Consumer Durables industry at 19.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.85%, as per the Simply Wall St company report.

GN Store Nord Future Earnings Per Share Growth

Risks

• The Enterprise division experienced a negative 3% organic revenue growth in 2024, and market conditions did not improve as anticipated, which could indicate ongoing challenges that may impact future revenue growth.
  
• The consumer business, specifically the Elite and Talk product lines, had a negative 31% organic growth due to their wind-down, negatively affecting the total revenue and indicating potential risks in consumer demand and product transition strategies.
  
• The company is exposed to potential geopolitical risks, including new tariffs between China and the U.S., which could negatively impact margins, particularly in the Gaming and Enterprise divisions, and thus financial performance.
  
• GN faces foreign exchange rate fluctuations, especially the appreciation of the U.S. dollar, presenting a risk that could negatively impact reported EBITA margins.
  
• Given the increasing competition, particularly in AI-powered hearing aids, there may be concerns about GN Store Nord's ability to maintain its market share and sustain margin improvements, affecting long-term profitability.

Valuation

• The analysts have a consensus price target of DKK196.294 for GN Store Nord based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of DKK270.0, and the most bearish reporting a price target of just DKK125.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be DKK21.1 billion, earnings will come to DKK1.9 billion, and it would be trading on a PE ratio of 18.5x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of DKK144.05, the analyst price target of DKK196.29 is 26.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.