On Wednesday, Citi updated its stance on Nanosonics (NAN:AU) (OTC: NNCSF) shares, raising the price target to AUD3.15 from AUD2.70, while still recommending a Sell.
The adjustment follows the company's report of flat year-over-year revenue in constant currency for fiscal year 2024, with a 5% increase in consumables and a 7% growth in the installed base. However, capital sales saw an 11% decline.
The second half of the year proved to be stronger than the first for Nanosonics. The company provided guidance for fiscal year 2025, with expected revenue growth between 8% and 12%, aligning with consensus estimates, and projected EBIT within the same range.
Despite these forecasts, Citi noted several points of concern, including slower growth in North American consumables compared to the installed base and ongoing constraints on U.S. hospital capital budgets.
Citi also highlighted Nanosonics' strategic shifts, such as establishing new distribution partnerships in the EMEA region. Another significant point was the company's continued efforts to gain approval for its product Coris by May 2025, despite inquiries from the FDA. Due to these factors, Citi has modified its EBIT estimates for fiscal years 2025 to 2027 by 39% to 67% and EPS by 41% to 66%, citing higher revenue and margins.
The revised price target of AUD3.15 comprises AUD2.15 for Nanosonics' Trophon business and an additional AUD1 for the potential of Coris. However, Coris-related expenses, totaling $27 million in fiscal year 2024, continue to impact the company's profit margins, which underpins Citi's decision to maintain a Sell rating on the stock.
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