GN Store Nord Earnings: Management Raises Hearing Guidance After Solid Start to 2023; Shares Cheap

We are maintaining our fair value estimate of DKK 270 for narrow-moat GN Store Nord GN as management raises fiscal 2023 guidance given a strong start to the year in GN Hearing. The adjusted EBITA margin was 6%, down 0.8% from the first quarter of 2022 due in part to the OMNIA expansion, while revenue grew 7% organically. We currently view shares as undervalued.

Hearing instruments revenue grew 14% organically over easy 2022 comparables, while the emerging business (Jabra.com) grew 46%. The expansion of the OMNIA product portfolio and Sonova’s absence from the Costco channel boosted GN Hearing’s revenue and market share, leading to 15% total growth. With comparables normalizing, we anticipate growth will be in the low to midsingle digits for GN Hearing in 2023.

GN Audio eked out 2% organic growth as SteelSeries and consumer offset the enterprise subsegment, which accounts for the majority of GN Audio revenue and posted negative 3% revenue growth. The small revenue growth overall unsurprisingly leaves Audio down from the first quarter of 2021, but we anticipate the new Enterprise product cycle will boost GN Audio’s revenue in fiscal 2024.

GN updated hearing guidance from 2%-8% to 5%-10% organic revenue growth as core hearing adjusted EBITA margin narrowed from 13%-16% to 14%-16%. GN Audio’s guidance has remained the same (negative 10% to +5% organic revenue growth and adjusted EBITA of 10%-15%), resulting in group guidance increasing to negative 5% to +7% organic growth in the year. This falls in line with our current forecast, albeit our model leans toward the lower end of hearing guidance and roughly flat growth for GN Audio. Management will announce its plans for the 2024 and 2025 debt maturities (approximately DKK 7 billion of which is due in 2024) soon.