CSL (ASX: CSL) is one of three Tier 1 plasma therapy companies that benefit from an oligopoly in a highly consolidated market. All the players are vertically integrated as plasma sourcing is a key constraint in production.

The plasma sourcing market is currently in short supply, however, CSL is well positioned having invested significantly in plasma collection centres, owning roughly 30% of collection centres globally.

We award CSL a Narrow moat rating based on the cost advantage afforded by its large-scale plasma collection and fractionation, and intangible assets based on the intellectual capital in its existing products and the proven success of its R&D efforts over time.

Why have CSL shares fallen?

Despite no material announcements, shares in CSL have declined another 12% since reporting interim results in February 2025.

We think the market has been disappointed recently by CSL’s smaller segments, Seqirus and Vifor.

Sales in Seqirus are challenged by rising vaccine hesitancy. This is likely to worsen as vaccine safety comes under increasing scrutiny from the Donald Trump administration.

However, the outlook for CSL’s main plasma division, Behring, which contributes roughly 75% of group gross profit, remains strong.

CSL guides to net profit after tax before amortisation of USD 3.2 billion to USD 3.3 billion in fiscal 2025. This implies 10% to 13% growth on fiscal 2024.

Guidance factors in continued gross margin recovery in Behring and group revenue growth of 5% to 7%, largely driven by immunoglobulins, or Ig. First-half fiscal 2025 Ig revenue was up a strong 15%, and Behring’s gross margin expanded 170 basis points.

We expect cost efficiencies in Behring as the firm’s Rika Plasma Donation System reduces average donation times by 30% and its individualised nomogram system, iNomi, improves average collection volumes by 10%. CSL is also making improvements in its manufacturing yields of Ig from plasma collected.

Shares look undervalued

We maintain our AUD 325 fair value estimate and earnings forecasts for narrow-moat CSL.

Shares are undervalued as we remain optimistic about the long-term demand for Ig driven by improving diagnosis rates for existing and new indications.

We forecast a five-year Ig revenue CAGR of 10% and expect CSL Behring’s gross margin to better its pre-pandemic level of 57% by fiscal 2028, broadly consistent with management’s expectations.

As of June 23, CSL shares had a Morningstar Star Rating of four.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.