Panmure Liberum has downgraded Tristel from 'buy' to 'hold' and trimmed its price target from 450p to 420p, citing slower-than-expected progress in the United States and emerging competition in some of the infection control specialist's core markets.
The broker said Tristel's full-year results were in line with expectations, with revenues up 10% to £51.1 million and EBITDA up 15% to £14.9 million, but expressed mild disappointment at the pace of the US rollout.
Tristel makes decontamination products used on medical devices in hospitals, and its US expansion centres on two products: OPH, a high-level disinfection solution for ophthalmic equipment, and ULT, a disinfection system for ultrasound probes.
OPH has gained traction quickly, generating £388,000 in its first year of US sales, ahead of forecasts, but royalty income from ULT came in at £271,000, below the £320,000 Panmure had pencilled in.
The broker said infection control departments were notoriously cautious buyers, but it would have liked to see more momentum at this stage.
Tristel is also facing new competition in Europe from a rival wipe product using peracetic acid, a different active ingredient to Tristel's chlorine dioxide technology.
Panmure said the competitive threat was being managed for now and that Tristel's own next-generation 3T product could act as a further barrier to entry.
The broker expects to cut its pre-tax profit forecast for the year ahead by around 13%, from £14.5 million to around £12.6 million, though it noted it had been sitting at the top of the analyst range, meaning the hit to broader market consensus would be closer to 5%.
With the shares trading at 430p and the revised target offering only limited upside, Panmure said it needed to see a clearer acceleration in US growth before turning positive again.
