CSL (CSL) – Vaccines not stabilising

CSL engages in the research, development, manufacture, market, and distribution of biopharmaceutical products, principally plasma-derived treatments and nephrology therapies and vaccines in Australia, the US, Germany, the UK, Switzerland and China. CSL was founded in 1916 as Commonwealth Serum Laboratories, sold by the federal government in an initial public offering in 1994, and is headquartered in Melbourne, Australia.

CSL downgraded FY26 guidance for revenue growth to 2–3% from 4-5% and net profit growth to 4–7% from 7–10%, with reduced demand for albumin in China due to Beijing's cost-saving measures hurting its dominant Behring division and further expected declines in vaccination rates in the key US market dragging on its Seqirus business. That "heightened volatility" in the US influenza vaccine market – the company forecasts a further 12% decline in general population vaccination rates in FY26 and a decline in vaccine revenue in the mid-teens – also means the proposed spin-off of the Seqirus division will be deferred until conditions improve, versus the original schedule to complete the separation by the end of FY26.

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The company did flag some higher-than-expected benefits from currency movements, however, which in Ord Minnett’s view means market expectations for net profit are only likely to be tempered rather than slashed. The vaccine uncertainty has also led the company to downgrade guidance for FY27 and FY28 net profit growth to "high single digits" from double-digit growth previously. Post the announcement, we have cut our EPS estimates by 2.1%, 2.0% and 1.9% for FY26, FY27 and FY28, respectively. There is apparent value in CSL assuming this is the last of the major events to shake the company following a torrid few months that saw the share price slide more than 30%.

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Our concerns over revenue growth and the timing of margin recovery in the Behring business, however, along with the complications introduced by plans to spin off the Seqirus business, and most recently by the new US tariffs, means we maintain our Hold recommendation and cut our target price to $235.00 from $258.00.