Why CSL is stuck. Consider ResMed

12 September 2025
Author: Sandstone Insights

The CSL story has lost shine. Management has lost credibility with investors. The company has gone from growth to requiring significant cost out and restructures to maintain the prospects of double digit earnings growth.

Whilst there were some one-off factors impacting the FY25 result, we expect there are some more structural issues which will continue to plague CSL.

CSL’s bio-pharma business is not broken (just bruised). The small on market buyback is a useful signalling tool. But ultimately, we view the current share price as an ‘opportunity cost’ and likely to trade sideways until it can demonstrate some clear improvements in both its operating and earnings rhythm.

Estimates on 1 Jan 2024 for Behring gross profit were ~US$800m higher than where they are now at in mid Sep 2025. There is still significant execution required to return to a higher gross margin in the core blood plasma business.

With CSL only focussing on better priced tender contracts, we view risks to the actual volume growth of its plasma products. The pathway to pre-Covid margins is now much longer and may potentially not ever be reached.

Figure 1: CSL’s slower margin recovery comes at $800m cost of lost earnings

Source: Visible Alpha, Sandstone Insights.

ResMed (RMD) is the preferred pick in the healthcare sector. RMD doing the opposite of CSL, demonstrating accelerating top-line growth and an improvement in margins.

We expect the market is still under appreciating the new demand opportunity from sleep apnea detection wearables becoming the norm.

We expect this can materially lift diagnosis rates, and better customer conversion can lead to higher priced products. RMD has discovered more manufacturing efficiencies with its new and latest devices, driving better gross margins. Better cost control and heightened scale can drive EBIT margins higher than consensus expectations, driving valuation re-rates.

Fears around miracle weight loss drugs have kept a lid on the share price despite clear earnings momentum and no major evidence of major population weight loss, particularly in the US. RMD is highly likely to outperform CSL in our view, over the next 12-24 months.

At an investor day in Sep 2024, RMD outlined it expects “high single digit” revenue growth to FY30. The market is only sitting at ~7%pa. With a targeted focus on growing top-line, just a ~200bps increase in the growth rate would see a ~US$750m uplift in revenue in FY30E.

Couple this with operating leverage improvements from higher volume, we could see consensus EBIT numbers understating FY30 by more than US$500m+.

It’s never nice to sell low, but we back the faster car in RMD to more than offset any losses.

Figure 2: RMD earnings momentum is accelerating. A 2%-point improvement in revenue growth opens up a >$750m revenue opportunity by 2030E, which is not currently captured by market estimates

Source: Visible Alpha, Sandstone Insights.