Further Deterioration in Hearing Care and Communications Demand for Demant in Third Quarter

Further weakness in the performance of the hearing care and communications segments in the third quarter have led narrow-moat Demant to pull down its already-reduced full-year projections. Development in the communication segment was foreseeable with a massive demand spike in the pandemic years leading to higher inventories in the sales channel and pulled forward demand, the effect of which is now further exacerbated by softening consumer spending. Weakness persistence in the hearing care business is more surprising, with Demant's struggles in the North American business proving to be less transitory. We will be modestly lowering our fair value estimate as we were overly positive on the communications segment sales trajectory in the next few years. However, shares are likely to remain in undervalued territory.