Ann: H2 FY24 Trading Update, page-16

Morgans upgrades Nanosonics after positive trading update

Nanosonics (ASX:NAN) has risen this week after providing a positive trading update with the disinfection device maker now expecting revenue of $170m for FY24, the upper end of its revenue guidance range of $164m to $171m.

NAN says it’s experienced robust growth in capital and consumables sales in H2 FY24, with revenue up to $90.4m, a 14% increase compared to the first half.

The top end of its its gross margin of 76-78% is now also anticipated, which Morgans says would imply a gross profit of ~$132.6m, which was marginally higher than the consensus estimate of $129m.

NAN says 3,850 of its probe sterilisation Trophon units were placed during the year, including 2,340 new installations and 1,510 upgrades.

Growth was seen across all regions, with North America, EMEA, and APAC all showing an increase in new installations and upgrades.

NAN says despite ongoing market challenges associated with hospital capital budget constraints in its major market of North America, the company has improved its sales conversion timeline in the second half.

Power says the launch of its second product – Coris – is the next big catalyst for NAN.

Coris is a device intended to improve the current tedious practice for cleaning flexible probes commonly used in procedures such as colonoscopies, gastroscopies, enteroscopies, endoscopic ultrasounds and bronchoscopies.

Nanosonics says Coris delivers a “novel sonicated mist” that accesses “all probe surfaces including body, handle and all crevices”, in turn improving infection control and reducing the risk of pathogens on the probes, which can be transferred to patients.

“The key catalyst the market has been focused on is the launch of CORIS, to disinfect flexible endoscopes and that is working its way through the approval process,” he says.

NAN has in the past been a been target of short-sellers but its short position has come down and is currently 5.5%.

Morgans maintains an add rating on NAN and has upgraded its 12-month target price from $3.5 to $3.75.