Nanosonics Continues To Be Challenged When Simultaneously Accelerating Investment

We keep our AUD 2.95 fair value estimate for narrow-moat Nanosonics after interim 2021 profit pretax of AUD 0.2 million. The recovery in revenue has been slower than we expected with reduced ultrasound procedures, limited hospital access and weaker USD. Despite a challenged top line, management reiterated guidance of about AUD 75 million in operating expenses. Accordingly, we cut out fiscal 2021 EBIT forecast by 87% to AUD 2 million but leave our long-term estimates broadly unchanged. Shares continue to screen as overvalued, reflecting the market’s more optimistic view of Nanosonics’ new product in infection prevention, which remains undefined but is still expected to begin commercialisation in fiscal 2022.