CSL Limited

CSL Details

CSL Enters HoA for the Supply of Doses: CSL Limited (ASX: CSL) is engaged in the development, manufacturing and marketing of pharmaceutical and diagnostic products, cell culture media and human plasma fractions. The market capitalisation of the company stood at ~$126.9 billion as on 7 September 2020.

Recently, the company stated that it has inked a Heads of Agreement (HoA) with the Australian Government for the of 51 million doses of the University of Queensland’s (UQ) COVID-19 vaccine candidate (V451). Post the successful clinical trials, the first doses are stated to release from mid-2021. Separately, the company also signed a HoA with AstraZeneca to manufacture ~30 million doses of the Oxford University vaccine candidate (AZD1222). Post the successful clinical trials, the first doses are stated to release early 2021.

Other Recent Updates: In another recent update, the company stated that Paul Perreault, a substantial holder of the company has acquired 31,961 ordinary shares and disposed of 31,961 exercisable performance share units, 1,491 lapse of performance share units and 14,516 ordinary shares. The exercise and lapsing of performance share units was for nil consideration, whereas the proceeds received from the sale of 14,516 Ordinary Shares was $4,092,193.95.

Decent Set of Numbers for FY20: The company has recently released its FY20 results for the period ending 30 June 2020, wherein it reported an increase in revenue of 9% Y-o-Y to US$9,295 million and a rise of 17% Y-o-Y in NPAT to US$2,247 million. As a result, EPS went up to 4.95 US cents, representing a growth of 17% on pcp on a constant currency basis. During FY20, CSL also witnessed a growth of 22% in the sale of Immunoglobulin to US$4,014 million, which was mainly due to strong demand for PRIVIGEN® and HIZENTRA®. The company also declared a final dividend of US$1.07 per share, which is to be paid on 9 October 2020 taking the full year dividend to US$2.02 per share up 9% Y-o-Y.

Key Financial Highlights (Source: Company Reports)

Acquisition of Exclusive Global License Rights: Recently, the company also announced the acquisition of exclusive global license rights from uniQure (NASDAQ: QURE) with an aim to commercialise an adeno-associated virus (AAV) gene therapy program, AMT-061, for the treatment of haemophilia B. As per the agreement, CSL will have the exclusive global right to commercialise AMT-061 upon closing the transaction.

Profit Guidance: For FY21, the company expects to deliver net profit after tax in the range of US$2,100 million to US$2,265 million on a constant currency basis. The company is likely to hold an Annual General Meeting on 14 October 2020.

Key Risks: Due to COVID-19, the company expects plasma collections to be impacted. The company is also exposed to other business risks such as research and development/commercialisation risk, and patient safety & product quality risk.

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

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

Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of CSL gave negative returns of 8.85% in the past 6 months and 5.16% in the past three months period. The stock is trading slightly higher than the average of its 52-week trading range of A$227.260 and A$342.750. The company possesses a decent cash position with available liquidity of around US$3.1 billion and net debt to EBITDA of 1.5x. On the technical analyses front, the stock has a support level of ~277.59 and resistance level of ~317.29. The company remains on track to witness continuous strong demand for plasma and recombinant products. COVID-19 led uncertainties and Seqirus’ product differentiation is likely to aid robust demand for influenza vaccines. EBIT margin of the company stood at 31.2% in FY20 on a constant currency basis. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method. For the purpose, we have taken peers such as Cochlear Ltd (ASX: COH), ResMed Inc (ASX: RMD), Sonic Healthcare Ltd (ASX: SHL), to name few, and arrived at a target price of low double-digit upside (in percentage terms). Thus, considering the company’s decent liquidity position, FY20 results, positive outlook, and the recently signed HoA with Australian Government, we give a “Buy” recommendation on the stock at the current market price of A$282.13, up by 1.104% on 7 September 2020.

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

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