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CSL

CSL Ltd – Share Price Up 6% On The Back Of Another Strong FY20 Profit Result

Timothy Anderson

Timothy Anderson is a contributor with the Australian Stock Report and is currently in his final year of studying a Bachelor of Applied Economics and a Bachelor of International Relations and Politics at the University of Canberra. Tim has a genuine passion for economics, specifically in macroeconomic analysis including how certain macroeconomic policies and indicators affect financial markets and the economy, as well as how these factors affect personal investment strategies. Tim currently holds RG146 Tier 1 Generic Knowledge 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 $A133 billion and CSL is the largest company listed on the ASX.

 

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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. 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).

What are the key features of the FY20 result for CSL?

CSL reported another positive FY20 result. CSL’s reported net profit for FY20 is $2.1 billion, up 17% in constant currency (CC) terms from FY19. Earnings per share for FY20 is $4.63, up 17% at CC terms from FY19. CSL will pay a final dividend of US$1.07 per share.

Regarding CSL’s operational performance, PRIVIGEN sales increased 20%, HIZENTRA sales increased 34%, albumin sales is down 36%, IDELVION sales increased 25%, AFSTYLA sales increased 21%, HAEGARDA sales increased 12%, KCENTRA increased 12% and ZEMAIRA sales increased 20%. Such large increases in sales of these products is impressive.

CSL strong financial performance is underpinned by continuing growth in CSL’s products. PRIVIGEN growth was underpinned by continued high patient demand for chronic conditions such as Primary Immune Deficiency, increased utilisation in the treatment of Secondary Immune Deficiency, together with the expanded CIDP label claim for both products. HIZENTRA growth has been underpinned by increase demand for home-based treatments during the COVID-19 pandemic. Albumin sales growth was down due to CSL transitioned to a new direct distribution model.

What is the outlook for CSL?

The outlook for CSL is positive. CSL provided guidance for FY21 (at FY20 exchange rates). CSL net profit for FY21 is expected to be in the range of approximately $2,100 million - $2,265 million in CC terms. This represents around 8% growth compared with FY20.

Looking forward over the medium to long-term the outlook for CSL is positive. CSL has achieved economies of scale and has a very strong competitive position in both the plasma and influenza vaccine 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.

What is the market reaction to the FY20 result?

The market reaction to CSL’s FY20 result is positive. CSL is up around 6% and is currently trading at A$310.74 (19 August 2020). CSL has a forward P/E ratio in the mid-forties and has an annual dividend yield of around 1%.


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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