CSL was able to grow plasma collections significantly, albeit at a higher cost, with collections up by 24%

Investment Thesis

The DCF valuation of CSL is >10% above the current share price.
Strong FY23 earnings guidance momentum as CSL continues to see strong demand.
Seqirus flu business which recorded its first year of positive earnings (EBIT) in FY18 and continues to perform well.
Strong demand for their portfolio of products.
High barriers to entry in establishing expertise + global channels + operations/facilities/assets.
Strong management team and operational capabilities.
Leveraged to a falling dollar.

Key Risks

Competitive pressures.
Product recall / core Behring business disappoints.
Growth disappoints (underperform company guidance).
Turnaround in Seqirus flu business stalls or deteriorates.
Adverse currency movements (AUD, EUR, USD)

Key Highlights: Relative to the pcp and on a constant currency basis:

Revenue was up +3% to $10,242m, driven by strong growth in haemophilia B product IDELVION® and key specialty product KCENTRA®, up +20% and 18% respectively, and strong performance in its influenza vaccines business, CSL Seqirus, which saw revenue up +13%. HPV royalties were up 55% rebounding strongly to now exceed pre-Covid levels following strong demand and increased supply.
NPAT of $2,236m, down -6% was at the top end of guidance, despite a difficult global environment, and immunoglobulin sales limited by constrained plasma collections in FY21, which however, improved 2H22 which saw growth in plasma collected.

Earnings per share of $4.81, was down -8%.
Acquisition of Vifor Pharma completed on 9 August 2022.
By key segments. CSL Behring: Revenue was up +2% to $8,598m driven by Haemophila, up 8% to $1,166m, and Specialty, up +3% to $1,792m, offsetting Immunoglobulins, down -3% to $4,024m and Albumin, down -1% to $1,072m. The segment was driven by IDELVION, up +20%; KCENTRA, up +18%; HAEGARDA, up +5%; HPV royalties, up +55%; whilst Immunoglobulin declined -3%. Plasma collected was up +24%. Gross profit of $4,580m was down -4%, whilst gross profit margin fell to 53.3% from 56.5%.
CSL Seqirus: Revenue of $1,964m was up +13%. Seasonal influenza vaccines sales were up +16% driven by US sales which were greater than $1bn for the first time and FLUAD® was up +41%. The segment saw record volume of ~135 million doses distributed in FY22. On a further positive note, the US Centers for Disease Control and Prevention adopted the Advisory Committee on Immunisation Practices recommendation that FLUAD® be a preferentially recommended seasonal vaccine option for adults aged 65+ years. Gross profit of $1,152m was up +16%, whilst gross profit margin improved to 58.7% from 57.3%.

Company Description

CSL Limited (CSL) develops, manufactures and markets human pharmaceutical and diagnostic products from human plasma. The company’s products include pediatric and adult vaccines, infection, pain medicine, skin disorder remedies, anti-venoms, anticoagulants and immunoglobulins. These products are non-discretionary life-saving products.

(Source: Banyantree)

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