Advancements In iNOMi Technology And HEMGENIX Will Strengthen Market Position

Key Takeaways

• Advancements in plasma collection and operational efficiencies are set to reduce costs and improve CSL Behring's margins, potentially boosting overall earnings.
  
• Product rollouts and expanded market approvals, especially in HAE therapy, aim to drive revenue growth and offset vaccine sector challenges.
  
• Declining immunization rates, lost contracts, rising costs, and competition could impact CSL's revenue, margins, and earnings amid exchange rate headwinds.

Catalysts

Researches, develops, manufactures, markets, and distributes biopharmaceutical and vaccines in Australia, the United States, Germany, the United Kingdom, Switzerland, China, Hong Kong, and internationally.

• The implementation of the iNomi technology and the rollout of RIKA plasmapheresis machines are enhancing plasma collection efficiency, potentially reducing costs and improving gross margins for CSL Behring.
  
• Ongoing advancements and approvals, like those for HEMGENIX and Garadacimab (ANDEMBRY), position CSL for potential revenue growth through expanding markets and strong product uptake in the HAE therapy space.
  
• The strategy to secure pandemic tenders for avian flu vaccines is expected to drive increased revenue for CSL Seqirus, providing a buffer against current market challenges in the U.S. influenza vaccine sector.
  
• The launch and expansion of products like KOSTAIVE and Filspari, as well as the stabilization of vaccination rates outside of the U.S., are likely to support revenue growth across international markets.
  
• The focus on operational efficiencies in plasma collection and manufacturing processes, along with progression in yield initiatives, is expected to bolster CSL Behring's gross margins towards pre-COVID levels, supporting overall earnings improvement.

CSL Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming CSL's revenue will grow by 7.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 18.0% today to 22.4% in 3 years time.
• Analysts expect earnings to reach $4.2 billion (and earnings per share of $8.6) by about February 2028, up from $2.7 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $3.6 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.8x on those 2028 earnings, down from 29.0x today. This future PE is greater than the current PE for the AU Biotechs industry at 22.7x.
• Analysts expect the number of shares outstanding to grow by 0.2% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.04%, as per the Simply Wall St company report.

CSL Future Earnings Per Share Growth

Risks

• The performance of CSL Seqirus has been negatively impacted by a significant decline in immunization rates in the U.S., specifically in the 18
• to 64-year cohort, which has led to competitive pressures in the market and could affect future revenue growth.
  
• CSL Behring lost a substantial contract for KCENTRA, leading to a 20% decline in its sales, which might hinder revenue and profit margins if not compensated by other products.
  
• The introduction of generic competition in Europe for CSL Vifor's iron product franchise, such as Ferinject, may intensify pricing competition, potentially affecting revenue and gross margins.
  
• There has been an increase in general and administrative costs by 27%, primarily due to the timing of one-off project costs, which could strain net margins if not managed effectively in the second half.
  
• Adverse exchange rate movements have created headwinds for the business, potentially impacting reported earnings if such trends continue.

Valuation

• The analysts have a consensus price target of A$315.99 for CSL based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$357.37, and the most bearish reporting a price target of just A$247.97.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $18.6 billion, earnings will come to $4.2 billion, and it would be trading on a PE ratio of 28.8x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of A$258.67, the analyst price target of A$315.99 is 18.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.