Resilient CSL Moves to Fair Value on Australian Dollar Weakness, Increase FVE to AUD 282

Narrow-moat CSL reports and transacts primarily in USD, and the significant weakening of the AUD relative to the USD, to 0.58 from 0.68 a month prior, translates into a fair value estimate of AUD 282 from AUD 236 previously. We make no changes to our forecasts for the company and assume the current exchange rate persists. We do not expect operational weakness from CSL as a result of the COVID-19 pandemic. The biggest risk is on securing plasma supply to feed into the nine-month manufacturing pipeline, and the company has commented that it is not observing COVID-19-related weakness to-date. Plasma supply is often countercyclical as donors turn to plasma donation for financial reasons in economic downturns. Following the global financial crisis of 2009, excess plasma supplies led to price weakness. However, we don’t expect this to recur due to the encouragement of social distancing, additional donor screening, and travel restrictions which may limit supply somewhat. In addition, there is a far higher demand for plasma products since 2009 due to new products and indications being approved in the interim.