CSL’s fiscal 2025 net profit after tax before amortization rose a solid 14%. But fiscal 2026 guidance implies 9% NPATA growth at the midpoint and assumes soft revenue growth of just 5%.

Shares fell 17% with the market questioning if CSL (ASX:CSL) can cut staff costs without slowing revenue growth further.

Earnings and guidance met our forecasts, but with lower sales growth than expected. With the firm cutting 15% of its staff, largely in R&D, and avoiding low-margin tenders, we are less positive on long-term plasma revenue growth and cut our group revenue forecasts by 5% on average.

Streamlining the firm benefits margins

By halving R&D sites, CSL aims to reinvest half the fixed costs saved to hasten quality innovation.

CSL also intends to demerge with Seqirus, its vaccines business, by June 2026. The demerger allows CSL to focus on the core.

We forecast net aftertax savings from restructuring of USD 200 million by fiscal 2029, slightly offsetting our revenue downgrades.

Major efficiency initiatives enable faster, higher-volume donor collections. CSL closed 7% of its collection network in August.

Fair Value cut but shares undervalued

We cut our fair value estimate for narrow-moat CSL by 6% to AUD 305, with CSL now being more selective with tenders.

Shares are undervalued as we expect margins to rebound on efficiency initiatives yet to flow through. There is a lag of up to a year between plasma collections and sales.

We expect plasma gross margins to recover to prepandemic levels of 57%, consistent with CSL’s reiterated view. Plasma gross margins rose 130 basis points to 51%, broadly in line with our forecast, and temporarily hit by higher labor costs as CSL completed its Rika system rollout in June.

Our forecast 10-year revenue compound annual growth rate of 6% is largely driven by our 10-year immunoglobulin, or Ig, revenue CAGR of 8%, from 9% prior. Long-term demand for Ig is driven by improving diagnosis rates for immunodeficiencies and is largely safe from competition.

CSL Ltd (CSL)

  • Moat Rating: Narrow
  • Fair Value: $305 per share
  • Star Rating: ★★★★

Keep up to date this reporting season

August will see the vast majority of ASX listed companies report their latest results to shareholders.

For a long-term take on developments in the companies and industries our analysts cover, subscribe to our daily email for our latest reporting season articles.

Subscribe to get Morningstar insights in your inbox

Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.