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Can Tristel more than double revenue and profits over five years?


Tristel LON:TSTL the AIM-listed, Cambridgeshire-based, disinfectant manufacturer published its Audited Preliminary Results for the year ended 30th June 2023 this morning (16th October)

The company has had an excellent year and reported a 37.8% increase in adjusted pre-tax profit year-on-year to GBP6.2m. The growth in profits was driven by a 16% y-o-y increase in turnover to GBP36m and a growth in overseas sales from GBP20.1m in 2022 to GBP23.5m, representing 65% of total sales. The company is highly cash-generative, debt-free and at the end of June had GBP9.5m in the bank, an increase of 6.7% compared to 2022. Tristel announced a 10.5p dividend per share, up 10% on 2022 proving the adage that ‘where there’s muck, there’s money.’

The share price hasn’t done badly either, opening the week at 406.5p and offering a 4.2% return year-to-date and a 27% increase over one-year, with shares ranging from 272p to 450p over a 52-week period. The company has a market capitalization of GBP187.2m.

Tristel has enjoyed positive analyst coverage

Analysts have been quite positive on the stock, with Liberum opening coverage on Tristel in August with a ‘Hold’ recommendation for the stock and a target price of 375p and Numis, which initiated coverage in May, with a ‘Buy’ recommendation and 390p target price, saying: “Tristel is a unique play within UK Medtech, offering high-level disinfectants, backed by a proprietary chemistry, used for the decontamination of medical devices and surfaces in hospitals.”

The Numis analyst continued: “We think Tristel could more than double revenue and profits over five years, with the base business underpinned by diagnostic procedure demand, while potential US market expansion, pending FDA approval, represents a significant growth inflection point, which we believe is partly discounted.” The stock has already sailed past the recommended prices of these two analysts and may still have more momentum to come this year.

The disinfectant manufacturer has justified the positive sentiment in its stock with its sales and profit-before-tax being ahead of analysts’ consensus, with the watershed event for the Snailwel-based firm getting the greenlight from US and Canadian regulators to enter the North American market. Tristel launched its Duo Ophthalmology product in Canada, and Duo Ultrasound product in the USA under EPA approval, and acquired US Food and Drug Administration authorisation for its endocavity equipment disinfectant in all states in the US in June, which was promptly put on general sale across the country.

Products used in every UK hospital

Tristel was founded in 1993, and makes disinfectant products based on Chlorine dioxide (ClO2), an antibacterial. The company’s products are used in every hospital in the UK and specifically utilised to clean down medical equipment that is used in a patient’s body, such as a probe, between uses, as well as surfaces a patient might lie in during treatment.

Its products’ non-toxic nature saw it rapidly gain industry popularity and it began to grow market share. To manage its growth, Tristel listed on AIM in 2005 and two years later it had established a manufacturing plant in Cambridgeshire.

The company offers its ClO2 products in wipes, sprays, washers and piped-in solution, as well as sterile carry bags and has application in virtually every part of direct patient contact, from Ear, Nose, Throat, to Endoscopy, Gastrointestinal, Urology and Ultrasound. Focused on disinfecting the four main vectors of infection: instruments, surfaces, water and skin, Tristel has become something of a verb in the NHS, with clinicians asking their colleagues ‘Have you Tristel-ed that scope?’.

The company operates in 15 countries already but is eagerly targeting the vast medical care markets of North America and China. The company claims that a device or surface will be bacteria-free with 30-seconds from the application of its products. The company’s products broad-spectrum utility, ease-of-use, efficacy, non-toxic and biodegradable nature have made them the go-to of clinicians in the UK and increasingly becoming a popular option in other markets.

Awareness of hygiene has heightened following the pandemic

The company had a bit of a reversal in fortunes last year, as the Coronavirus pandemic saw hospitals close for non-emergency procedures, but as the NHS returned to normality (well, as normal as the NHS can be as it veers from one crisis to another) and started inviting patients back into the wards for scans, checkups and non-emergency surgery, Tristel saw its fortunes turn around.

Arguably, Covid has offered the business a boon, as awareness of hygiene has heightened following the pandemic, and every square centimetre of a clinical space has to be completely sterile, the company has seen an uptick in the demand for its disinfectant products.

Paul Swinney, Tristel’s chief executive said in a statement this morning: “The enormous achievement of the year has been the FDA approval, which enables us to enter the largest healthcare market in the world. We will also be able to leverage the significance of an FDA approval in countries that look to the USA regulator for their own practice. This includes Central and South America. We now have the opportunity to establish a global footprint for our products and technology.”

As an entry point to the medical sector, this stock is worth considering. As previously reported, the biotech and pharmaceutical sector is a notoriously difficult and expensive space for prospective drug and medical devices to make a transition from laboratory to hospital shelf, due to the onerous regulatory and testing process a new treatment has to navigate prior to acceptance.

Potential for Tristel products is vast

Tristel’s products are a lot simpler than most products seeking regulatory acceptance, have utility in every aspect of medical services, have years of use already in the NHS and has this year navigated the hurdles set by North American regulatory authorities. They are a ‘stack-em-high’ kind of product that you’ll find in every room in every hospital and the potential for Tristel products in this estimated USD35bn marketplace is vast.

Bridgewise, the AI analyst rated Tristel as a ‘Buy’. The analyst said: “According to their recent financial reports […] Tristel had several impressive financial metrics that should make them more attractive than their peers going forward. Their growth and value factors indicate a well-executed and balanced strategy, which is generating exciting growth. These results lead us to believe that there should be significant upside potential for the stock. We gave Tristel a 90 rating and a ‘Buy’ recommendation.”

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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