CSL appears to be approaching a profitability low point in FY26, with FY27 expected to mark a return to earnings growth. Management’s transformation initiatives, lower plasma collection costs, and the removal of excess immunoglobulin (Ig) inventory from the US market should support margin recovery and earnings improvement. While challenges remain from competitive pressures in Ig, albumin, KCentra and Vifor pricing, the company is positioned to deliver modest profit growth.
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Key Bull Points
- FY27 earnings recovery expected: FY26 is likely the trough year, with FY27 benefiting from easier comparisons, including the removal of ~$300m of excess Ig inventory and ~$300m in transformation savings.
- Behring margins should improve: Lower plasma collection costs from nomogram collections are expected to drive a noticeable gross margin recovery, supported by around a 10% increase in plasma collected per donor at no extra cost.
- Transformation programme provides meaningful support: CSL expects approximately $300m of gross cost savings in FY27, equivalent to roughly 8% of FY26 NPATA guidance, helping offset industry pricing pressures.
- Impairments are largely irrelevant to cash flow: The estimated $5 billion impairment charge is non-cash, with the main benefit being lower future amortisation expenses, which could modestly support reported NPAT.
- Valuation remains attractive: Despite lowering the price target to $158/share (from $175), the stock trades at a significant discount to the broader market multiple, offering potential upside as earnings recover in FY27.
