Strong Q4 + promising takeaways

Demant reported strong Q4 22 results. Growth was driven by Hearing Healthcare, but partly offset by weaker Communications. Notably, despite difficult market conditions, the firm managed to report healthy results/organic growth. Moreover, the firm announced the launch of a new flagship hearing aid – which could be the most-important re-rating catalyst for Demant. Overall, the stock is worth a go at current levels.

Soft Q3 + consecutive guidance downgrade

Demant reported soft Q3 results. A slowdown in the US private pay market with a resulting guidance downgrade plus a pause in the share buy-back program has spooked the markets – with the stock collapsing c.13% today. Communications’ sustained vulnerabilities were an added concern. While the management has implemented cost reduction initiatives there is no visibility on new products (a key catalyst) and, hence, Demant is one of the least preferred hearing aid stocks in our coverage.

Soft Q2 + guidance downgrade

Demant reported soft Q2 results. While, like Sonova, the management also downgraded is full-year outlook, the brewing slowdown in the US hearing aid markets is a concern for the Hearing Healthcare segment. The underlying issues for Communications are an added complication. While the stock has seen a substantial sell-off in recent months (including yesterday), buying into the dip warrants caution in that there are no near-term share price catalysts.

In line Q1, full year guidance reiterated

Demant has made decent start to the year, driven by an impressive performance in the Hearing Healthcare segment, although this was partly offset by weaker Communications, due to tough comps and supply chain challenges. Importantly, the group has maintained its full-year outlook, despite the ongoing geo-political crisis. While Q1 sales were largely in line, our estimates should reset lower to reflect the divestment of the Hearing Implants business at a lower price. Hence, our cautious stance on t

Hearing Healthcare recovery continues; capitalise the entry opportunity

Demant has witnessed positive momentum/recovery across most Hearing Healthcare sub-segments. While the negative H2 performance in Communications was a drag on 2021 and is guided to continue in Q1 22, the overall performance recovery is expected to remain on track. Even though stiff competition and other challenges warrant some caution and, hence, no further performance upgrade, the stock is currently trading at attractive levels/multiples, given the sell-off in recent weeks (including the post r

Marginal guidance upgrade won’t trigger a change in stance

So far in H2, Demant has witnessed positive momentum/recovery across most hearing-related sub-segments. Particularly, Oticon More was able to gain market share in the VA channel and posted strong growth in the NHS as well. Although EPOS remained under pressure. 2021 adjusted EBIT guidance was increased marginally while top-line growth guidance was maintained. As our estimates are already on the higher side, we don’t expect any major changes and our cautious recommendation should be maintained.

2021 CMD: ambitious targets unveiled

Demant’s management targets aggressive mid-to-long-term growth. Besides a recovery in Hearing Healthcare, to also benefit via the Oticon More launch, the growth prospects in Communications seem promising. Strong FY21 guidance was reinforced. As a result, our estimates should reset higher. However, considering that competition is head-on with Sonova’s Paradise and there could be some near-term business/margin challenges (as already guided for Communications), our cautious stance should be maintai

As communications slows, hearing healthcare takes the lead; FY21 outlook upgraded

Despite the deceleration in communications, Demant reported a sales beat in H1, benefiting from the hearing aids market recovery, the robust traction for new products and reform-related tailwinds in France. Strong sales growth combined with cost savings led to significant margin expansion. Anticipating the release in pent-up demand, the FY21 outlook has been upgraded with hearing healthcare to lead the pack. However, communications is likely to shrink in H2 and continued investments into R&D and

Better-than-expected operational performance ytd; FY21 targets raised

Year-to-date, Demant’s organic revenue has grown faster than management’s expectations with strong demand for Oticon More and Philips HearLink leading to market share gains in Hearing Aids. Also, Hearing Care benefited from a continued market recovery and strong growth in Europe. Given the ongoing trend of vaccination, particularly in the US, management anticipates pent-up demand in H2 and thus full-year sales and profitability targets have been upgraded. Share buy-back amount has also been rais

Pent-up demand visible in H2 20; ambitious guidance for FY21

Driven by the strong recovery in hearing healthcare market and robust demand for its communications solutions, Demant returned to growth in H2 20, though sales were below the normal level. Interestingly, strict cost management bolstered profitability as well. Assuming the hearing market normalises in H1 21, management has set ambitious but risky targets for FY21 – pent-up demand for hearing solutions and the recently-launched Oticon More should be the key growth contributors. The DKK2bn share bu

As expected, a new product launched

Demant has launched a new product – Oticon More comes with an industry-first in-built Deep Neural Network (deep/ machine learning) which improves audiology performance. This is a multi-brand launch, allowing Demant to target a wider patient base and ensuring strong sales momentum into 2021. Nonetheless, given the stiff competition within the hearing aids industry, the new product is priced only marginally higher than the previous device as management’s focus is on market share gain.

H2 revenue guidance narrowed; EBIT outlook instilled

Supported by pent-up demand, Demant’s revenue has continued its positive trend towards normalisation since mid-August and H2 revenue guidance has thus been narrowed – on easier comps, the wholesale business is expected to remain flat while retail is likely to grow in mid-single-digits. The structural cost-cutting initiatives are also delivering results and thus an EBIT outlook has been introduced. With rival Sonova and GN out with their latest product offerings, we await a similar announcement f

Strong recovery towards the end of H1

Demant’s H1 revenue declined 27% organically, though a recovery was visible towards the end of H1 on the back of pent-up demand. Management has guided for +5-15% revenue growth for H2 and the operating profit, which slipped into the red in H1 due to operational de-leverage, should also be back in the black. However, the reinforcement of lockdown restrictions, particularly in the US, and new lead generations continue to be the key risks.

With markets re-opening gradually, Demant’s sales run-rate improves to 50-60%

Benefiting from the gradual re-opening of economies, conditions within the hearing healthcare market have improved and Demant is now operating at a 50-60% sales run rate (vs. 30% in May). Many European countries have seen a progression and the activity level has increased amongst independents. However, as Demant resumes commercial activities and ramps up operations, opex is approaching normalisation faster than revenue – the run rate now at 75-85% (vs. 60% in May) – and thus EBIT is expected to

After a strong start, Demant is operating at 30% run-rate; recovery spill-over into 2021?

Until mid-March, Demant reported double-digit organic growth driven by a robust product portfolio. However, COVID-19 led to the closure of hearing clinics across key markets, which severely impacted sales and profits. Currently, Demant is operating at a c.30% revenue run rate. Nonetheless, the fundamentals of the hearing aids industry are still intact and we should see a gradual recovery, which could spill-over into 2021. Until then, the headsets business, which is benefiting from the working-fr

FY22 in line – focus on core increasing

FY22 results are in line with revised estimates. Management continues to intensify its focus on the growing, profitable and cash generative Point-of-Care and Life Sciences activities, where confidence in the latter opportunity is increasing. We make some modest changes to our forecasts to reflect further streamlining post-period end and point to the strong growth outlook from FY24 onwards. We believe this is being overly discounted by the market and view the shares as being in deep value territo

Clean exit from ADL Health

EKF has announced a clean solution has been found for the non-core Laboratory Testing business ADL Health, selling the business back to one of its management team. Having pared back our estimates for this division in February, we expect no further material impact on earnings from this move. Strategically, we view it as positive, removing a distraction and further re-focussing activities back towards the core established Point-of-Care & Central Labs business and the growing new Life Sciences acti

SHORE CAPITAL - Destiny Pharma plc+ (DEST, House Stock at 30p)

Hybridan Small Cap Feast - 06 Mar 23

6 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objective

LIBERUM: Futura Medical* - Eroxon live in EU, FDA decision now Q2

Hybridan Small Cap Feast - 23 Mar 23

23 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv

Positive momentum persists

2022 was a pivotal year for NIOX as it moved firmly into sustainable profitability and cash generation. The foundations for a scalable platform are now well-established and the group enters 2023 with strong momentum (revenues in the first two months of the year were +19%). Having upgraded our forecasts following the trading update in January, we push through further EBITDA upgrades on improved margin assumptions. NIOX is a rare asset and fully deserves a premium rating. We stay at Buy, with an i

Tissue Regenix - FY 2022 – a pivotal year to a sustainably profitable business

Tissue Regenix reported full-year results to 31 December in line with its January trading update that indicated it had reached EBITDA profitability in Q4. What was undisclosed then was that it included a $0.45m provision, without which it would have generated an adjusted EBITDA of c.$0.4m in H2, illustrating the positive underlying progression to a profitable and sustainable growth company. The outlook remains positive – new products, new geographies and additional distributors/strategic partner

Morning Note – 27 March 2023

Hybridan Small Cap Feast - 21 Mar 23

21 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv

Hybridan Small Cap Feast - 24 Mar 23

24 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv

Morning Note – 21 March 2023

SHORE CAPITAL - Warpaint London+ (W7L, House Stock at 198p)

Destiny Pharma - Positive Phase II data with XF-73 published in medical journal

Destiny Pharma announced the publication of Phase II data with anti-bacterial drug XF-73 nasal gel in the peer-reviewed medical journal, Infection Control & Hospital Epidemiology. The data showed that XF-73 treatment in an 83-patient study resulted in a >99% reduction in nasal Staphylococcus aureus burden (after three applications of nasal gel 24 hours prior to surgery) measured 1 hour prior to cardiac surgery, which was the primary end-point of the study. The data are consistent with previous s

Hybridan Small Cap Feast - 14 Mar 23

14 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv