Demant A/S: Pause for breath; moving to Neutral

Research evidence excerpt

Demant A/S: Pause for breath; moving to Neutral

Demant A/S UBS Research

UBS Research THESIS MAP Thesisa guideMapto our thinking and what´s where in this report

Pivotal Questions Q: Is the hearing aid market structurally impaired?

No. While end-market growth has been better of late, investors remain wary about structural

weakness given underperformance over the past two years. Our analysis suggests the market is not

impaired, but inefficient: the high price of sale increases demand volatility at limited economic benefit

to the manufacturer, and episodic hardware replacement every 4-5 years slows the release and

monetisation of R&D. We believe a shift to an AI aftermarket model where manufacturers sell

continuous software improvements through the installed base can add 2-3ppt of market growth per

year and offset volume maturation.

Q: Does Zeal offer Demant a meaningful competitive advantage?

Yes. We believe Zeal is the best offering in the ITE category for user/fitting experience, lower adoption

friction, and higher potential scalability. Our deep-dive work suggests these advantages uniquely

position it to not just take share but expand the ITE segment, which we estimate currently captures

5% of hearing loss patients but could reach up to 20%. We see less clear upside in the larger

RIC segment (c.35% of hearing loss patients today, we estimate ceiling is c.80%), where a number of

players are poised for new launches in H2, including Sonova and, we believe, Demant. While we

know little about Demant's offering, the detail supplied by Sonova suggests its new platform likely

meaningfully improves and resolves key limitations of its predecessor.

VIEW Demant is amongst the best performing stocks in EU Medtech YTD, outperforming the sector by

40%.