Danish financial institution Danske Bank sees great potential in the GN share in the slightly longer term after the company has announced a merger of the two divisions, GN Audio and GN Hearing, into one company.

There are great synergies to be gained. Meanwhile, the valuation of the share, which has been extremely difficult in recent years, is so low that its potential is great .

”Despite the fact that the short-term estimates look too high in our eyes, we find the valuation attractive,” writes analyst Christian Sørup Ryom in an analysis note.

He estimates that there will be approximately DKK 1bn (USD 142.2m) in annual cost synergies to be gained from the merger. On this basis, there are also good opportunities to extract reasonable cash flows from operations.

In the short term, however, there is a risk that the consensus has become too optimistic, according to Danske Bank’s analyst.

”Our updated estimates assume approximately DKK 400 million in restructuring costs in 2024, which leaves the operating profit (EBITA) approximately 17% lower than the consensus from after the second quarter results (however, only about 2% below when adjusting for special items),” Ryom writes in the analysis.

”Our estimate of adjusted EBITA for the third quarter of DKK 433 million is approximately 13% below the consensus gathered by the company itself,” he continues.

Danske Bank lowers its price target for GN to DKK 215 from DKK 230, but the recommendation remains ”buy.”

The price target is still just over 80% above the current price on Tuesday of DKK 119.15 which has landed after an increase of 2.8% for the day.

(Translated by DeepL with additional editing by Christian Radich Hoffman)