Five years later, we‘re Buyers of Sonova

Research evidence excerpt

Five years later, we‘re Buyers of Sonova

headwinds - slowing US

procedure volumes, cost inflation, and China weakness - while an AI-driven product and service

evolution should support structurally faster market growth and higher wholesale margins over time.

More importantly, for the first time in five years we prefer Sonova over Demant, driven by: (1) most

attractive relative valuation since 2021 for the same organic earnings outlook, (2) compelling and

underappreciated RIC product cycle, and (3) earnings estimates that are 4-6% above consensus. Buy.

EVIDENCE Our detailed volume/value models (here) illustrate how developed market demographic mix is less

suited to driving hearing aid adoption from 2025 onwards, and this in the absence of further

reimbursement expansion likely causes volumes to mature. We also build an AI aftermarket model

(here), which maps the additional growth contribution from a structural shift to software revisions in

between traditional platform release cycles.

WHAT´S PRICED IN? Sonova holds close to its largest PE discount to Demant in nearly 5 years for the same medium-term

organic growth. Investor feedback suggests this is due to a perceived competitive gap in the

ITE segment (10% of market volumes). However, with both likely to launch in the RIC segment (80%

of volumes), we think Sonova's new platform based on detail provided is poised for traction in this

larger addressable market not captured by the relative valuation.Please

Upside/Downside

Spectrum

Hearing Instrument CAGR Core EBIT margin, Valuedrivers Terminal growth

FY27-31E FY31E

CHF 275 upside 7.0% 25.4% 2.5%

CHF 242 base 6.4% 23.9% 2.0%

CHF 175downside 4.0% 21.0% 1.5%

Source: UBSe

Company Description Sonova the largest player in the c.$7bn hearing aid market.