Telix: Market Appears Overly Optimistic; Initiating With an AUD 17 Fair Value Estimate

We initiate coverage on Telix Pharmaceuticals with an AUD 17 fair value estimate. Shares are currently overvalued, trading at an 18% premium to our intrinsic assessment. We suspect the market is too optimistic about the speed and extent of Illuccix's commercial sales, contributing over 85% of our fair value estimate. We estimate that the average selling price of Illuccix will decrease by 15% when its transitional pass-through payment status expires in June 2025. The market is also overly excited about potential new earning streams from Telix's product pipeline that commercially remain unproven in an increasingly competitive market. Regardless, due to low capital requirements and high profit margins, Telix enjoys high returns on invested capital. Our Morningstar Uncertainty Rating for Telix is High, and we assign a Standard Capital Allocation Rating.