Goldman Sachs initiates Nanosonics stock with Buy rating on Trophon franchise

Goldman Sachs initiated coverage on Nanosonics (ASX:NAN) with a Buy rating and a AUD4.90 price target, citing the defensive nature of its Trophon franchise and the undervalued potential of its CORIS product in infection control. The bank notes the market is discounting Trophon's margin accretion, which funds the CORIS launch, despite CORIS's superior cleaning ability, and that Nanosonics' five-year valuation de-rating assigns minimal value to this new product. Key risks include delivering 10% FY26 revenue growth, further CORIS regulatory approvals, and potential U.S. regulatory changes.

Analysis

Goldman Sachs has initiated coverage on Nanosonics (ASX:NAN) with a Buy rating and an AUD4.90 price target, signaling a bullish outlook predicated on two main factors. First, the bank views the company's core Trophon franchise as having defensive characteristics and margin accretion potential that are currently being discounted by the market. Second, it identifies significant, unpriced upside in the new CORIS infection control product. According to Goldman's channel checks, CORIS demonstrates cleaning capabilities that substantially surpass the current standard of care. However, the market appears skeptical, as reflected in Nanosonics' valuation de-rating over the past five years, which suggests minimal value is being ascribed to this new product pipeline. Goldman Sachs tempers its optimism by noting that consensus forecasts for CORIS's profitability in FY27-FY28 may be overly optimistic and highlights several key risks, including the delivery of 10% revenue growth in FY26, the need for further CORIS regulatory approvals, and potential changes to U.S. regulations.

Key Decisions for Investors

• Investors could consider the Goldman Sachs 'Buy' rating as a signal of a potential value opportunity, where the market may be underappreciating both the stable margin growth of the core Trophon business and the long-term potential of the CORIS product pipeline.
• It is critical to monitor specific catalysts and risk factors identified by the bank, particularly the company's ability to achieve its FY26 revenue growth targets, progress on CORIS regulatory approvals, and any developments in U.S. healthcare regulations.
• Given the stock's five-year valuation de-rating, investors might view the current price as offering a margin of safety, with the CORIS product representing a significant, but not yet priced-in, call option on future growth.