CSL Ltd (ASX: CSL) shares have underperformed market expectations in recent times.
CSL shares have fallen 22% for the year to date.
Following its FY25 result, the healthcare giant fell 17%, marking its largest single-day decline since it listed in 1994.
A major focus of that earnings result was CSL's plan to demerge vaccine business Seqirus, which surprised the market.
In the aftermath, a number of experts suggested the company had been oversold and assigned price targets well above the share price.
Since hitting its 52-week low of $189 in September, the company has rebounded around 15%.
While the S&P/ASX 200 Index (ASX: XJO) sits not too far below its all-time high, experts continue to see value in CSL shares.
Macquarie analyses demerger
This week, Macquarie Group Ltd (ASX: MQG) released a new research note, Moving the needle, which provided its initial views on the potential Seqirus demerger ahead of Capital Markets day.
Based on Macquarie's analysis of 48 demergers, spin-offs (Sequris in this case) have historically underperformed the ASX 200 Index for 12 months after the demerger. Macquarie analysts attributed this to valuation uncertainty and lack of trading history.
Additionally, Macquarie's analysis revealed that the parent (Behring/Vifor in this case) will perform in line with the market for around 14 months after the demerger before outperforming, as strategic initiatives are rolled out.
Commenting on the potential Seqirus demerger impact, Macquarie said:
At the current share price, we derive a group EV/EBITDA (pre-AASB16) multiple of 13.7x. Taking a multiple of 9.0x for Seqirus, in line with vaccine peers, implies a multiple of 14.3x for the remaining business (i.e., Behring and Vifor), ~4% ahead of the current group multiple. A slightly higher multiple is supported by improved earnings, with a 3-year EBIT CAGR of ~11% for the remaining business vs ~9% for the group.
Despite a higher estimated EBIT margin for Seqirus (~35%) compared to Behring (~28%), Seqirus only represents ~10% of group earnings. As such, we expect limited margin dilution following the demerger, with the group at 31% in FY26 compared to the remaining business at 30%.
New price target
On the basis of this analysis, Macquarie described CSL shares as undervalued with little risk from the demerger in a "considerably expensive market".
Macquarie reiterated its outperform rating on the ASX 200 stock, while also lowering its price target from $295.90 to $275.20.
Given that CSL shares are currently changing hands for $219, that suggests around 28% upside from here, including dividends and capital gains.
Summarising this view, the broker said:
We remain positive on CSL given the fundamental upside in what is otherwise an "expensive" market. The majority of sectors are trading above their historical PE ratios (ASX300 PE is +2SD above the mean) while CSL is -1SD below its mean since 2001. Outperform.
