This report is an updated version of the report published on 21 January 2025 at 1:19 PM AEDT.

PolyNovo Limited (ASX: PNV)  

PolyNovo Limited is a medical device company specialising in advanced wound care. The company designs, develops, and manufactures dermal regeneration solutions, including NovoSorb® BTM and NovoSorb® MTX, utilising its patented NovoSorb biodegradable polymer technology. Its development program encompasses breast sling, hernia, and orthopaedic applications. 

Recommendation Rationale - SELL at AUD 2.280

• Facing Resistance: The stock has crossed its Resistance 1 level. However, its 14-day Relative Strength Index (RSI) is showing a reading of ~64.45, which indicates the stock is approaching overbought zone.
• Overvalued Multiples: On a forward 12-month basis – key trading multiples (Price/Earnings, EV/EBITDA, EV/EBITDA, Price/Cash Flow and Price/Book Value) are higher than the median of the Healthcare Industry.
• Pricing Constraints: FY24 was a turnaround year for PNV as it reported a net profit after tax of AUD 5.3mn vs a net loss of AUD 4.9mn in FY23. However, the company is cautious about implementing price increases to avoid the perception of overcharging customers, which could limit potential revenue growth.
• Regulatory Uncertainties: The timeline for FDA approval of new products remains uncertain, potentially affecting the company's ability to expand its product offerings and enter new markets as planned.

PNV Daily Chart

Valuation Methodology: EV/Sales Approach (FY Jun'25E) (Illustrative)

PNV is expected to trade at a slight premium compared to its peers considering the BARDA trial progress, revenue growth in FY24, EBITDA turnaround, product portfolio expansion, and expansion into new markets. For conducting valuation, the following peers have been considered: Resmed Inc (ASX: RMD), Nanosonics Ltd (ASX: NAN), Cochlear Ltd (ASX: COH), and others.

Considering that the stock is approaching overbought zone, market uncertainties, and risks associated, the share price can witness some correction at the current levels before moving higher. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 2.280, as of 21 January 2025 at 11:25 AM, AEDT.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 21 January 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.