On Tuesday, Goldman Sachs initiated coverage on Demant A/S (DEMANT:DC) (OTC: WILYY) shares with a Buy rating and a price target of DKK 340.00. The firm cited a challenging fiscal year 2024 for the company, marked by share losses in the Managed Care channel in the U.S., headwinds in the Chinese Diagnostics business, and overall softness in the Hearing Aid market.
These factors have led to a downward revision of consensus earnings per share (EPS) estimates for fiscal years 2025 and 2026 by 7% and 8%, respectively, since July.
Demant's stock has experienced a devaluation both absolutely and relatively due to the aforementioned challenges. The company is currently trading at a greater than 20% discount compared to other manufacturers in the Hearing Aid sector, which Goldman Sachs notes is near a 20-year valuation low point.
Despite the recent headwinds, Goldman Sachs forecasts a more positive outlook for Demant in fiscal year 2025. The firm predicts an acceleration in organic growth from +3% in fiscal year 2024 to +6.3% in fiscal year 2025.
This growth is expected to stem from the annualization of current headwinds, share gains in the U.S. independent channel following strategic brand changes, and a growth boost from France due to easy comparables and the anticipated replacement cycle prompted by the 4th anniversary of the RACO reform.
Goldman Sachs also anticipates that Demant will benefit from a more disciplined approach to cost management, which should aid in margin recovery. This outlook provides the basis for the new Buy rating and price target set by the investment firm.
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