In our “HOT” stock column today, Raymond Chan from Morgans explains why he regards CSL as a buy.
“We view CSL as materially undervalued, trading on an Enterprise Value to Earnings Before Interest and Taxes (EV/EBIT) of 18.2x, more than 25% below its 10-year average (24.7x),” Raymond said.
“Based on a conservative SOTP (some of the parts) valuation, we estimate fair value of $196 billion, implying approx. 35% upside from current trading levels.
“Notably, the market appears to be valuing CSL on less than a single division, with an approx. 10% discount to the core Behring business alone, while effectively assessing zero or negative value to Seqirus and Vifor.
“We adjust our underlying earnings estimates lower by approx. 4%, mainly on lower sales assumptions in Seqirus and Vifor, with our target price declining to $303.70,” Raymond said.