Morningstar | GN Store Nord's 3Q in Line With Our Expectations; Maintaining Valuation
GN Store Nord reported third-quarter revenue of DKK 2.6 billion, a 12% increase from the third quarter last year, with a 1% acquisition contribution offset by a 1% currency decline. The 12% organic growth was mainly driven by GN Audio at 20% organic growth, above our expectations, while GN Hearing delivered 6% organic growth as expected. Our fair value estimate of DKK 250 and narrow moat rating are intact. The shares are currently trading in 3-star territory.GN Hearing remains focused on the brand's independent market penetration. The Linx 3D product family and new Linx Quattro premium-plus price point device were the main drivers of the double-digit organic revenue growth in the North America independent channel. Resound Linx Quattro was introduced in the Veterans Affairs channel Nov. 1, helping GN to finally position itself in the rechargeable category in this lucrative government channel. In Europe, GN Hearing gained share in its main markets, including France. The French market is mostly in the hands of independents, with Amplifon and Audika, a William Demant retailer, as the other two key distribution channels. Asia-Pacific and emerging markets reported double-digit organic growth.
In the audio business, the strong double-digit organic growth was mainly driven by the CC&O segment across regions and channels. The professional Jabra Engage wireless headset launched in April contributed to the growth. The consumer segment, in an ongoing repositioning, also reported strong growth on the back of the Jabra Elite family.
Margins came in line with our expectations. Gross margin at 62% was slightly down compared with last year's third quarter, with the audio segment product mix the main driver of the decline. The group's EBIT margin at 16.3% was mainly in line with last year, with a 90-basis-point research and development expense increase more than offset by lower general and administrative costs.
GN Store Nord is an electronics communication products group based in Denmark. Co. is engaged in the manufacture and marketing of products for personal communication. Co.'s product offering includes hearing instruments, corded and wireless headsets, and audiologic diagnostics equipment used to test people's hearing and sense of balance. In addition, Co. offers products and accessories such as speakers, amplifiers, headset telephones, and adapters, as well as software and equipment for fitting hearing instruments. Co.'s operations are organized along two business divisions: GN Netcom (headsets) and GN ReSound (advanced hearing instruments).
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