Nanosonics nears 3-year lows as lackluster growth weighs on valuation

Nanosonics (ASX: NAN) shares have fallen back to March 2020 levels as earnings came in below expectations for the first-half of FY22. The company's stock is down 12% at noon.

Financials at a glance: 

• Revenue of $60.6m, up 41% 

• Net profit of $3.9m, up 165%

• Cash at bank of $92m 

The result missed Morgans’ forecasts of $63.2m for revenue and $5.0m for net profit.

Nanosonics currently trades at around 130 times FY21 earnings compared to the healthcare sector average of just 36. Amid a broader shift away from fast growing, richly valued stocks, investors likely expected more growth from the ex-market darling.

Installed base grinds higher

Nanosonics produces an world-leading ultrasound probe disinfection device, which is referred to as an installed base. 

Global installed bases grew 5% in the last 6 months to 28,160 units.

Growth was mixed across its core North America, Europe/Middle East and Asia Pacific regions. The general view is that installed base figures should pick up as covid restrictions ease.

Transition to new sales model

Nanosonics confirmed it will end its distribution agreement with GE in the North American region by June 2022. 

Nanosonics will now manage the end-to-end customer experience from inventory and warehousing, through to sales and installation for its trophon product. 

The revised sales model is forecast to have a $13m to $16m impact on revenues in the second-half of FY22. 

Outlook 

“Despite the inherent risks and uncertainties associated with COVID-19, we remain optimistic the shift from pandemic to endemic management measures from H2 FY22 will improve market conditions enabling further capital and consumables growth,” said CEO Michael Kavanagh. 

While no guidance was provided, Nanosonics said FY22 margins will fall to 75%, down from 78% in FY21. Though, this reflects an altered revenue mix including from lower margin consumable and capital sales.

Nanosonics flagged a forecasted jump in FY22 expenses, up 31% to $93m.