CSL shares slip as Morgans calls stock 'materially undervalued'
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The news: CSL shares edged lower as Morgans slashed its target price on the biotech giant but described the company as "materially undervalued".
The numbers: Shares were down 0.6% to $240.88 at 1:50pm AEST, extending losses of more than 20% over the last 12 months. The wider healthcare sector was down 0.35%.
Morgans retained its 'buy' rating on the stock but cut its target price from $329.26 to $303.70.
Analyst Derek Jellinek said CSL shares are now trading more than 25% below their 10-year average. Based on a "conservative" sum-of-the-parts valuation, Morgans estimates a fair value of $196 billion for CSL, implying a 35% upside from current trading levels.
The context: Jellinek noted that the threat of US tariffs and policy changes under US Health Secretary Robert F Kennedy Jr have negatively impacted investor sentiment across the global healthcare sector.
This week US President Donald Trump said the US will soon impose tariffs of up to 200% on pharmaceuticals, but companies would be given more than a year to reshore supply chains before they come into effect.
However, Jellinek said CSL's current trading levels are "significantly below" fair value, with the company's primary Behring division alone justifying a higher valuation. At current levels, he said, no value is assigned to either CSL's influenza vaccine company Seqirus or its specialty pharmaceuticals business Vifor.
What they said: "While Behring continues to do the heavy lifting, ongoing cost right-sizing and unmet demand across all divisions gives us confidence in a double-digit earnings growth trajectory over the medium term," Jellinek said.
The source: Morgans research
