CSL Limited

CSL Details

Agreements to Manufacture COVID-19 Vaccines: CSL Limited (ASX: CSL) is engaged in the development, manufacturing, and marketing of pharmaceutical and diagnostic products, cell culture media and human plasma fractions. As on 02 October 2020, the market capitalization of the company stood at ~$130.93 billion. The company has signed an agreement with the Australian Government to supply 51 million doses of the University of Queensland’s COVID-19 vaccine candidate and a separate agreement with AstraZeneca to manufacture the Oxford University candidate if the clinical results are successful. Upon completion of successful clinical trials, CSL expects the first tranche of doses to be available by mid-2021. The company recently appointed Joy Linton as the CFO.

FY20 Financial Highlights: During FY20, the company reported a strong year with a growth of 9% in revenue to US$9,151 million and an increase of 17% in net profit after tax to US$2,103 million. In the same time span, earnings per share stood at US$4.63 per share, up from US$4.24 in the pcp.

FY20 Financial Highlights (Source: Company Reports)

Outlook: The company is making decent progress in market demand. In the medium term CSL expects to continue to grow through developing differentiated products and expanding markets. The company anticipates that the demand of plasma recombinant and vaccine products is likely to be robust, particularly for immunoglobulins and influenza vaccines.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The sudden outbreak of COVID-19 is driving increased demand for the company’s products. CSL retains a healthy balance sheet with decent credit ratings and a net debt to EBITDA ratio of 1.5x. As per ASX, the stock of CSL gave a return of 1.19% in the past three months and a return of 2.17% in the past one month. The stock is trading on its average 52-weeks’ level and retains further potential for growth. On the technical analysis front, the stock of CSL has a support level of ~$268.408 and a resistance level of ~$308.484. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and have arrived at a target price of lower double-digit upside (in % terms). Considering the current trading levels, decent returns in the past three months, and modest long-term outlook, we recommend a ‘Hold’ rating on the stock at the current market price of $284.670, down by 1.081% on 02 October 2020.

CSL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

EBOS Group Limited

EBO Details 

FY20 Highlights: EBOS Group Limited (ASX: EBO) is a diversified Australasian marketer, wholesaler and distributor of healthcare, medical and pharmaceutical products. As on 02 October 2020, the market capitalization of the company stood at $3.7 billion. During FY20, revenue of the company went up by 26.5% to $8.8 billion. During the year, the company reported an increase of 33.2% in statutory EBITDA to $333.6 million. In the same time span, statutory NPAT of the company went up by 18% to $162.5 million, which resulted in an increase of 12% in Statutory EPS to 100.6 cents. EBOS has reiterated its policy of declaring dividends of not less than 60% of NPAT. The decent financial and operational performance enabled the Board to declare a dividend of 77.5 NZ cents per share, reflecting an increase of 8.4% on the pcp.

FY20 Financial Highlights (Source: Company Reports)

Impact of COVID-19: During the months of April and May, lower foot traffic and reduced cough and cold season impacted sales in Community Pharmacy and Consumer Products. However, EBOS benefitted from its industry leading distribution network, the defensive nature of its products and services, and a strong balance sheet during the COVID-19 market conditions.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: EBOS has recorded a strong financial performance in FY20 across both Healthcare and Animal Care and is exploring investment opportunities to expand the group. Given the company’s scale and market leading position in stable industries and its healthy balance sheet, it seems to be well placed to respond to the challenges ahead. As per ASX, the stock of EBO gave a return of 12.38% in the past three months and a return of 6.17% in the past one month. The stock is inclined towards its 52-weeks’ high level of $24.25. On the technical analysis front, the stock of EBO has a support level of ~$21.407 and a resistance level of ~$23.02. We have valued the stock using the EV/Sales multiple based relative valuation and have arrived at a target upside of lower double-digit (in % terms). Considering the current trading levels, decent returns in the past three months, and modest long-term outlook, we recommend a ‘Hold’ rating on the stock at the current market price of $22.40, down by 1.322% on 02 October 2020.

EBO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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