* CEOTRONICS and GN's FalCom seem to perform well... * ... but growing competitors also means higher competition * We host a Teams call with CEOTRONICS' CEO on 25 September FalCom is gaining traction in GN and CEOTRONICS share +115% YTD We have looked at recent sales figures for two of Invisio's competitors: CEOTRONICS, listed in Germany, and GN Store Nord's product group, FalCom. Both companies were historically small, but they have grown in size during the recent increase in military spending, as has been seen with Invisio. GN's share increased 20% on the Q2 report last week, and the company highlighted strength for its FalCom product portfolio reaching almost DKK 100m in sales in Q2 (about one-third of Invisio's Q2 sales). CEOTRONICS has a fiscal year that ends in May, but it grew 89% in the 12-month period ending in May 2024 (defined as 2024 in the tables below for comparison purposes). The momentum is clearly positive, with the share being up 115% year to date (YTD). On customer activity, CEOTRONICS announced for example already in April 2024 that it will equip up to 191,000 German soldiers with control units by 2030, the largest order in the company's history. All outlook comments from the three companies remain unanimously positive. Digitalising defence industry is a strong tailwind, competition could intensify All companies in the sector are experiencing strong demand from the defense industry for digital communication and enhanced hearing protection in noisy and complex environments. We believe this creates a significant opportunity for growth. Invisio has been the dominant player in this market, but we are now seeing smaller competitors gain ground and win large tenders. Demand and volumes will likely remain strong for several years, but pricing may become a more important factor as customers have more alternatives. Invisio's gross margin has recently decreased slightly (after adjusting for the third-party deal in 2024-25e), which may indicate increasing price caution among customers. For example, FactSet consensus does not expect CEOTRONICS gross margin to expand, but rather to remain stable at ~43% (well below Invisio's ~60%), and GN commented that FalCom's gross margin was roughly 56%. However, it is a positive sign to see such improving growth rates and demand in the sector, which supports our mid-term organic growth estimates of ~15%. CEO call with CEOTRONICS on 25 Sep To gain further insight into the industry and learn more about market dynamics, we will host a Teams call with Thomas H. Günther, the CEO and Chairman of the Board of CEOTRONICS, on 25 September CET 14:00 to 15:00. The call is open to ABGSC clients.
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