Firing on all cylinders

We initiate on CSL with an AUD350 Price Target and Buy rating. We see commercial tailwinds in all divisions and a 13% FY23-27E sales CAGR: 1) We expect Behring's immunoglobulin (IG) franchise to recover strongly (UBSe FY24 revenue +2.4% vs cons) and gene therapy Hemgenix (US dosing pending) to become a blockbuster. 2) We expect Vifor to deliver on 10%+ pa sales growth guidance (UBSe 12% FY22-26 CAGR) driven by IV iron recovery and new launches (Korsuva, Tavneos). 3) Seqirus (flu vaccines) remains underappreciated; shift to new products offers pricing and volume growth. Our DCF suggests shares currently bake in lower IG and vaccine growth than we see and we are 9% ahead of Reuters cons. FY24 EPS. We see upgrades driving a re-rating; our PT would see shares on 31x FY24E adj.EPS, close to biopharma peers with double-digit mid-term sales growth (NOVOB: 28x; LLY: 36x) and in line with CSL's 10yr average.

Behring can execute on multiple axes

CSL has been rebuilding plasma inventory and we think increasing demand can be met in FY24. We are not too worried about 2Q23 data for efgartigimod in CIDP from Argenx - the use case for IG does not overlap exactly. Hemophilia A products are set to shrink due to competition, but success in hemophilia B (Idelvion, Hemgenix) means the franchise should grow overall. Garadacimab (pipeline) should be able to generate an incremental USD700m in HAE long term. We are cautious on CSL112 (data early '24) for heart attack patients given prior failures with similar mechanisms, but see nothing in the shares. Behring is well insulated from US Medicare pricing reform - plasma products are exempt - and we expect this will continue to appeal to the incremental buyer.

CSL Vifor could deliver 12% top-line CAGR FY22-26E

Newly acquired Vifor (deep dive pg. 21) has upcoming commercial and regulatory milestones which we think will see the story gain traction. IV iron is the biggest segment and the impact from payer restrictions in the US should ease into FY24. Much has been made of potential generics to Injectafer from '26 but the ex-US version (Ferinject) is more economically important. FY23 could see sales numbers for anti-itching drug Korsuva and Tavneos (rare kidney disease drug), which we think will launch strongly, as well as a potential European approval for sparsentan (for IgAN, a rare kidney disease).

Valuation: DCF-derived Price Target of AUD350 per share

We value CSL shares using DCF (WACC 7.5%, terminal growth 3.5%). The greatest sensitivities, in our view, are to long-term growth in IG and flu vaccines.