Throughout FY21 CSL has meaningfully underperformed the ASX 200. The persistent weakness in CSL’s share price reflects the ongoing challenge in its US plasma collection business.
The US is the largest consumer of Immunoglobulin (IG) globally, accounting for ~50% of global demand. COVID-19 has impacted the collection of plasma due to the restriction of movement and social distancing. In Jan-21 CSL’s US Plasma collection centres functioned at ~73% of previous year activity levels, an 18ppt fall on sequential months. The timing of this fall in collections largely correlates with the deterioration in Covid-19 infections in the US and the introduction of US stimulus payments which began in the last week of Dec-20.
Notwithstanding this, we see the medium-to-long term fundamentals for CSL’s plasma businesses as robust with continued strong demand for IG therapies. Indeed, CSL offers strong exposure to a post Covid-19 recovery for plasma therapies. We expect a pathway to full collection recovery begins alongside a post Covid-19 vaccine in Jun-21 Qtr.
CSL’s influenza vaccine company (Seqirus) remains well placed to deliver strong revenue and earnings growth for FY21, with the tailwind of an expanded Australian National flu vaccine program (NIP), and a higher price mix effect. Moreover, Seqirus should also benefit from another strong flu season in its largest vaccine markets in the northern hemisphere season 2021-22.
CSL’s attractive earnings growth profile is supported by a pristine balance sheet with Net debt/EBITDA at 1.5x.