Disappointment over first half sales and an abrupt change to a US distribution agreement sent shares of
-Nanasonics revises US distribution agreement
-First half sales miss versus the consensus estimate
-A slowdown for new installations and product delays
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At the same time, the infection prevention company released below-consensus sales figures for the first half of the financial year.
Under the new agreement,
As
First half sales were -4% below the consensus estimate though grew 40.4% year on year.
Over the course of the last year, the share price has fallen from a high of
However, one broker spies a strong buying opportunity for investors, with the company's multiples falling below long-term average levels.
The reseller agreement
Citi feels consumables should not be impacted and sees the transition to a direct model in
Wilsons is positive on the change to the reseller agreement, as it should create new business from ultrasound original equipment manufacturers (OEMs) including Toshiba, Hitachi and Philips. It's felt OEMs currently access Trophon in a sporadic, client-driven way.
While changes can potentially improve the gross margin profile on recurrent consumables sales, Goldman Sachs cautions the logistical complexity of the business is materially increased. Moreover, there's a risk some customers are slow to transition or never do so.
The broker sees clear risk the company cannot sustain historical rates of momentum in new/upgraded hardware sales and lowers its target price by -14% to
The change of agreement has prompts Ord Minnett to take a more conservative view of future revenue and earnings growth and the broker downgrades its rating to Lighten from Hold.
Ords lowers its target price to
Value on offer?
The analyst points to the confidence inherent in Nanosonics largely taking over the sales function, owning the end-customer and better controlling its growth drivers.
Some in the market believe
New product delay
Morgans' FY23 and FY24 revenue forecasts of
Morningstar believes the market has gotten ahead of itself in relation to this product. An external clinical assessment is still required before product development is finalised. Upon release,
Installation run-rate concerns
Since 2017, new installations have generally fallen every year in
The installation run-rate has declined from 2,000 in the second half of FY16 to 1,360 in the first half of 2020 pre-pandemic and trading conditions have worsened since.
Also, despite a presence since 2015 in
Overall, FNArena's database has three broker ratings with one Buy and two Sell or equivalent and a consensus target price of
For those brokers that are not in the FNArena database, Morningstar retains its
First half FY22 results are due on Thursday, 24 February.
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