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CSL

CSL Ltd HY20 Results – Strong Result And Positive Long-Term Outlook

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

CSL Ltd (ASX: CSL) is a global company that develops and manufactures biopharmaceutical products mainly derived from blood plasma. It also develops and manufactures influenza vaccines. CSL’s key markets are the United States (48 per cent of revenue) and Europe (25 per cent of revenue), CSL’s market capitalisation is around $A146 billion and CSL is the 2th largest company listed on the ASX.

CSL - STRONG RESULT

CSL has been one of the strongest performing Australian companies since its public listing on the ASX in 1994. For example, the average annual growth in CSL’s share price has been over 25 per cent per annum since being publicly listed in 1994. CSL share price has increased by 67% over the last 12 months.

 

What are the key features of CSL HY20 report?

  • Reported net profit after tax (NPAT) for HY20 is US$1,248m up 11% at constant currency (CC) compared with the corresponding period.
  • Reported total revenue for HY20 is US$4,911 million, up 11% at CC compared with the corresponding period.
  • Reported total dividend for HY20 is US0.95 cents, up 12% compared with the corresponding period (converted to Australian currency, the interim dividend is approximately A$1.42 per share, up 18%).
  • Reported earnings per share for HY20 is US$2.75, up 11% at CC compared with the corresponding period.
  • FY20 NPAT is now expected to be in the range of approximately US$2,110 million - US$2,170 million at CC representing approximately 10-13% growth over FY19

 

What are the drivers of this positive result?

A key driver of this strong result was CSL’s immunoglobulin portfolio performing exceptionally well. PRIVIGEN® sales grew 28% and HIZENTRA® sales grew 37%. Underpinning this growth has been continued strong patient demand together with an expanded label claim for both PRIVIGEN® and HIZENTRA® to now include CIDP (Chronic Inflammatory Demyelinating Polyneuropathy), a debilitating neurological disorder.

CSL’s operational highlights are as follows:

  • PRIVIGEN® +28%
  • HIZENTRA® +37%
  • ALBUMIN -33% (GSP IMPACT)
  • IDELVION® +21%
  • AFSTYLA® +30%
  • ZEMAIRA® +31%

 

What is the outlook for CSL?

Looking forward over the medium term the outlook for CSL is positive.

  • Currently, CSL is ranked number 1 in global plasma therapies (a $US30 billion global industry and CSL has only two other global competitors) and number 2 in influenza vaccines (a $US6 billion global industry).
  • CSL has achieved economies of scale and has a very strong competitive position in both markets. Additionally, both industries have very high barriers of entry, reducing the likelihood of further competition in the future. An example of CSL’s competitive position is that it is the most efficient in the United States market at collecting plasma which enables it to keep its costs at industry best practice.
  • CSL is expanding production facilities located at Broadmeadows in Victoria and Kankakee in the United States as well as elsewhere. The Broadmeadows facility is expected to produce therapies with an estimated annual market value of A$850 million by 2026.
  • This expansion in production reflects growing demand partly stemming from the aging population and a growing proportion of the population having access to high technology medicine.

CSL’s CEO Mr Perreault said, “CSL is well positioned for sustainable growth. Exceptional demand continues for our differentiated therapies. We expect to again outpace the market in expanding plasma collections and our objective to open 40new collection centres this financial year is on track.”

 

What is the market reaction to CSL HY20 results?

The initial market reaction to CSL HY20 results is positive. CSL today is up 1% and is currently trading at A$328.11. While the outlook for CSL is positive, CSL is currently very expensive to buy. CSL is currently trading at a forward P/E ratio in the high forties with an annual dividend yield of around 1.5%. Investors should closely monitor CSL in the coming months to observe whether there is a correction in the share price that might provide the opportunity to buy CSL at a cheaper price.

 


Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

 

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