CSL Ltd (ASX: CSL) shares look well-placed to shake-off the past year's decline and charge higher into 2026.
That's according to Morgans Financial, which labelled the S&P/ASX 200 Index (ASX: XJO) biotech stock "materially undervalued".
CSL shares closed down 0.62% on Friday, trading for $240.92 apiece.
That sees shares in the ASX 200 biotech stock down a painful 20.24% since this time last year.
Those losses will have been modestly eased by the two dividends CSL paid out over the year, totalling a (rounded) $4.25 a share. At Friday's closing price, the stock trades on an unfranked trailing dividend yield of 1.76%.
Over the past week, investors have pressured most ASX healthcare stocks amid concerns over the 200% tariffs that United States President Donald Trump says will be slapped on pharmaceutical imports next year.
But looking ahead, Morgans believes investors are significantly undervaluing the biotech stock at current levels.
Here's why.
As you may be aware, CSL operates three distinct business divisions.
The company's Seqirus segment counts among the world's largest influenza vaccine businesses. CSL's Behring segment focuses on treating rare and serious diseases, and its Vifor segment, acquired in 2022, provides renal disease treatment.
Explaining why it views CSL shares as "materially undervalued", Morgans said the stock is trading on an EV/EBIT [enterprise value / earnings before interest and tax] of 18.2 times.
The broker notes that this is "more than 25% below its 10-year average" of 24.7 times EV/EBIT.
"Based on a conservative SOTP [sum-of-the-parts] valuation, we estimate fair value of A$196 billion, implying [an approximate] 35% upside from current trading levels," Morgans said.
The broker added:
Notably, the market appears to be valuing CSL on less than a single division, with a c10% 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 c4%, mainly on lower sales assumptions in Seqirus and Vifor.
Morgans has a buy rating on CSL shares with a 12-month price target of $303.70. That implies a potential upside of 26% from Friday's closing price of $240.92.
The last release labelled price sensitive for CSL shares was the company's half-year results, reported on 11 February.
Highlights included a 5% year-on-year increase in revenue (in constant currency) to US$8.48 billion. And on the bottom line, net profit after tax was up 7% (in constant currency) to US$2.04 billion.
Looking ahead, management noted:
The fundamentals of CSL's underlying business units are robust and CSL is in a strong position to deliver annualised double-digit earnings growth over the medium term.
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