Equity Analysis of CSL Ltd
Added on 2020-07-22
21 Pages4595 Words456 Views
FinanceCalculus and AnalysisStatistics and ProbabilityBiology
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Equity Analysis
TABLE OF CONTENTS1. Executive Summary.....................................................................................................................12. Introduction..................................................................................................................................12.1 Objectives of the report.........................................................................................................12.2 Reasons for selecting CSL Ltd..............................................................................................13.0 Fundamental analysis.................................................................................................................23.1 Basic information...................................................................................................................23.2 Operation and competitive status analysis.............................................................................23.3 SWOT analysis....................................................................................................................104 Valuation.....................................................................................................................................114.1Analysis methodology..........................................................................................................124.2Assumptions.........................................................................................................................124.3 Historical data......................................................................................................................124.4.1 Beta analysis.....................................................................................................................144.3 Dividend growth rate estimation.........................................................................................154.4.2 Valuation model...............................................................................................................164.4.3 Valuation...........................................................................................................................174.4.5 Risk analysis and assumptions..........................................................................................175 Recommendation........................................................................................................................17
1. Executive SummaryIn the present era, investors prefer to take risk with the motive to generate high returnsfrom the amount invested. In this regard, equity valuation and beta assessment becomes thepriority which in turn helps in ascertaining the level of investment risk and stock’s volatility. Themain objectives of CBB investment company is to provide investors with higher returns. Hence,for enhancing the middle and long term investment return equity analysis of CSL Ltd’s stock isconducted by taking into account the fundamental and intrinsic value perspectives. For this report, CSL Ltd has been selected which one of the leading biotechnologycompany operating at global level. It is involved in the varied activities such as research,development, manufacturing and marketing of products or services that helps in treating as wellas preventing serious human medical conditions. Products which are offered by CSL Ltd includeblood plasma derivatives, vaccines, research and manufacturing applications etc. It can beconcluded from the evaluation that financial position and performance of CSL is good. However,it needs to make focus on ideal debt-equity ratio such as .5:1 which in turn helps in creatingoptimal structure. Further, it can be summarized from the evaluation that beta of CSL’s stockis .51 respectively which is not higher as compared to the market trend as whole. 2. Introduction2.1 Objectives of the reportThe main objectives of the present report are to assess intrinsic value of stock, beta andreturns that are associated with the stock of CSL Ltd. Hence, findings of the report will providepotential investors as well as portfolio manager with the input for decision making. The presentreport will provide investment management team with the strategies for effectual portfoliomanagement. 2.2 Reasons for selecting CSL Ltd At the time of stock selection, high level of emphasis is placed on middle-long terminvestment. In addition to this, aspect of risk minimization has also been considered whilemaking selection of stock for portfolio. Current portfolio of CBB does not include anybiotechnology company. Along with this, Australian Biotechnology Company has attainedleading position in the world and it is continuously growing. Thus, to strengthen the portfolioand enhancing the associated returns CSL Ltd has been selected by analyst. Inclusion of suchcompany in portfolio may result into diversity and minimization of portfolio’s risk. 1 | P a g e
3.0 Fundamental analysis 3.1 Basic informationCSL is one of largest company of Australia and is operating in biotherapeutics industry.Firm is currently operating multiple projects under which it is developing innovative biotherapiesthat save life of million of peoople. Firm have manufacturing plant in Australia, USA and someof European nations (Corporate profile, 2017). Mentioned company is specifically focusing onR&D so that more therapies can be developed. In current time period firm is leading producer ofplasma protein therapeutics. Firm is consistently expanding its market and have aggreiveinvestment plans. Thus, there is positive optimism about growth of business firm.3.2 Operation and competitive status analysis In order to measure competitiveness of CSL Ltd it can be observed that gross margin offirm increased in past couple of years at fast rate. In 2008 gross margin percentage was 45.8%and same increased to 52% in FY 2015. However, same declined to 49%. It can be said that firmcompetitiveness declined to some extent but most of times its gross profit growth rate increase. 1234567891045.848.15149.248.351.751.252.348.649.7Gross profit percentageFigure 1Gross profit ratioNet income in FY 2008 was 702 and it increased to 1739 in FY 2017. This reflect that over pastfew years firm business increased at fast rate and it become competitive. It can be said that firmis in good condition and its fundamentals are strong.2 | P a g e
1234567891002004006008001000120014001600180020007021146105394198313111387179616731739Net profitFigure 2Net profit of CSLIn 2013, The Biotechnology industry of Australia raised collectively $739 million whichclearly depicts the impressive and fastest growing sector. Although the sector faced economiccycle i.e bust and boom for four year decades, still, it has outperformed over last few years. CSLLimited is one of the global biotherapeutics establishment headquartered in Melbourne,Australia. It is delivering innovative biotherapies to the people to boost their life expectancy andhelp them out from life-threatening medical conditions. Table 1Ratio analysisParticulars Formula Amount (In 000)BaxterInternational inc 201320142015201620172017Profitability ratiosGross profit 275927312853306335964345Net profitability 13111307137912421337910Operating profit 1319163717581438176911513 | P a g e
Total revenue 5337533554596115692310283Gross marginpercentage (Gross profit/total revenues)*10051.17%51.19%52.26%50.09%51.94%42.25%Net marginpercentage (Net profit/total revenues)*10024.56%24.50%25.26%20.31%19.31%8.85%operating marginpercentage(Operating profit/totalrevenues*100)24.71%30.68%32.20%23.52%25.55%11.19%Total assets 6443627864017563912315546Shareholder’sequity 324233573577345741138290Return on assets(ROA)(Net profitability/total assets)*10020.35%20.82%21.54%16.42%14.66%5.85%Return onshareholdersequity(net profitability/shareholdersequity)*10040.44%38.93%38.55%35.93%32.51%10.98%Liquidity /short-term solvencyratios Current assets351432083339381846026574current liabilities 977845936137416182744Closing stock98716451756215225761430Current ratio (Current assets/current liabilities)3.60 3.80 3.57 2.78 2.84 2.40 Acid test ratio(Current assets-closingstock)/short-term liabilities2.59 1.85 1.69 1.21 1.25 1.87 Efficiency ratios Creditors 2822142583043997914 | P a g e
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