Company snapshot
currently the largest listed company in Australia.
a biotechnology company that develops and delivers medicine for people living with rare and serious medical conditions and also develop and deliver seasonal flu vaccines.
#1 global player for plasma therapies
#2 global player for flu vaccines
Sector: healthcare
Market cap: AU$129.1B (12/06/2020)
Business segments:
CSL Behring: develops plasma therapies for serious conditions (such as bleeding disorders and immune deficiencies).
Seqirus: develops flu vaccines and is also involved in preparing and responding to global pandemics.
1H FY 2020 Results (performance drivers, company outlook)
despite being an Australian company, CSL does report in USD.
the overall revenues for the first half of FY 20 increased about 11% compared to the first half of FY19.
this flowed through to the net profit after tax (NPAT) line and also earnings per share (EPS) both growing about 11%.
for a blue chip company of CSL size to deliver double-digit growth for both the top line and the bottom line is a pretty good result.
gross profit margins: has more or less remain constant
dividends per share (DPS): increased about 12%.
operating cash flow number: largely increased but it was probably more of a anomaly
capital expenditures: included the cost of opening up about 20 of the 40 plasma collection centers that they wanted to open for FY 20.
CSL Behring (plasma therapy)
sales for the first half of FY 20 increased about 10% compared to the first half of FY 19.
this was predominantly driven by their immunoglobulin therapies which increased 26%.
albumin therapies was down 33%, but this is temporary given that they're changing their distribution channels in China.
Seqirus (flu segment)
overall revenues for the half increased 9% with a majority of their revenues coming from the northern hemisphere.
the products that they're selling are predominately seasonal flu vaccines,
this means that sales are going to be heavily skewed to the first half of a year given where their demand comes from and the seasonal nature of the flu.
Research and Development Spend
CSL has guided that they're committed to investing about 10% of their sales to R&D.
over the years they're not only investing in new products but they're expanding their market reach and also improving their existing products as well.
Guidance
NPAT is going to be between $2.11-2.17 billion.
the previous full years result was $1.92 billion (10% to 13% increase).
so we should expect to see that overall sales lifting about a similar amount as well because the top line drives the bottom line.
we should expect this to be driven predominantly by the therapies from CSL Behring given the seasonality of demand for flu products.
CSL vs Global Peers (valuation vs quality)
Always looked expensive on headline valuation.
P/E Ratio at 45 (12/06/2020)
Some considerations: high quality company, dominant player, long growth runway, low interest rates.
In this peer set realistically it's only Grifols and Takeda that are the main listed competitors.
given that this peer group is a global peer set, ensure to be consistent with currency when comparing
Return on invested capital (ROIC %): a representation of business quality
average of the last 2 fiscal years of profit divided by the last 2 fiscal years of invested capital
= AVERAGE(NPAT FY18:FY19) / AVERAGE(IC FY18:FY19)
Very high
Enterprise value to invested capital multiple (EV/IC (X)): a representation of valuation
= EV / AVERAGE(IC FY18: FY19)
amongst this peer group CSL is looking very expensive.
Scatter plots
business quality (x-axis) and valuation (y-axis).
CSL is in the middle of this trend line.
CSL may look really expensive however when we factor in business quality CSL valuation is actually in line with what you'd expect for the quality of the business amongst this peer group.
Takeda only became a main competitor because it acquired one of CSL’s old competitor's Shire in 2019.
so potentially one of the two main competitors could have short-term weakness because of the merger.
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