Global blood products company CSL Ltd (ASX: CSL) has had a year to forget from a share price point of view and is changing hands not far off its lows over the past 12 months.
But the analysts at RBC Capital Markets believe the stock is oversold, and "while CSL is facing increased competition in its core markets and a backdrop of weak flu vaccinations, we believe the large share price fall now presents a compelling investment opportunity''.
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Recovery program on foot
CSL Chair Brian McNamee addressed the underperformance at the company's annual general meeting held in late October, and agreed that the fall in the company's share price, from highs of $282.20 to as low as $168, had been "disappointing''.
But he said the company was addressing areas where it could improve, and he had faith that the company's immunoglobulin business would "generate strong returns''.
On areas which needed improvement, Dr McNamee said:
The reality is that for some time CSL has been operating in a way that is too complex, and this has impacted our ability to react decisively to geopolitical headwinds and to maintain our market position. (Chief executive Paul McKenzie) and his management team, with the full support of the board, have identified areas where our business must evolve. They are bold strategic steps to reshape and simplify the business, build our growth pipeline, reduce costs and improve clinical and commercial execution.
Time to buy
The analysts at RBC have issued a research note to their clients this week and have upgraded CSL to an outperform rating, with a price target of $230.
They say they believe the first-half result could beat expectations, "which could begin the process for a stock rerating''.
As the RBC team said:
We forecast CSL beating consensus numbers for its 1H26 result underpinned by growth in Hemgenix and Speciality products revenue, a beat in Vifor and lower interest expense. We anticipate the operational beat being well taken and could begin the process for a stock re-rating.
While there were "numerous potential headwinds", including low vaccination rates, possible issues with US tariffs, and increased competition in some sectors, the RBC team believed these to be largely priced in at the current share price.
RBC added:
CSL is a well-run company with a market-leading position in plasma-derived therapies. The plasma-derived therapeutics industry is attractive to operate in given strong patient demand, the product is difficult to replicate, there are high barriers to entry and products do not face patent cliffs. CSL has a particularly strong position in the immunoglobulin market, which has been growing at a 9% compound annual growth rate.
CSL was valued at $85.62 billion at the close of trade on Monday.
