Reporting Season

CSL’s net profit down: Plasma collections underpin future sales growth

By Market Index
Wed 16 Feb 22, 1:31pm (AEDT)
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Key Points

  • $US1.04 a share interim dividend maintained
  • Goldman Sachs see potential upside to CSL's conservative guidance
  • Net profit down -5% within its first half result today

Despite reporting a net profit slid of -5% within its first half result today, investors took some solace from CSL’s (ASX: CSL) decision to maintain the dividend, and this helped the blood product giant’s share price move up 6% in early morning trade.

The biotech giant has clearly maintained its $US1.04 a share interim dividend in an attempt to divert the focus from the glaring contrast in net profit in the first half of 2021 which was up a whopping 45%.

For the six months ended 31 December, CSL managed to beat guidance with a reported a 5.3% increase in revenue to US$6,041m.

Seqirus stands out

Management attributed the beat to an 18% lift in Seqirus revenue, despite a -2% decline in CSL Behring revenue.

Commenting on the result, CSL CEO Paul Perreault, who has resurfaced down-under for the first time since covid began, tipped a return to a “more normalised environment” in the second half of fiscal 2022.

Overall, interim results were in line with the group’s expectations.

While CSL experienced strong growth in its leading haemophilia B product Idelvion and its specialty products Kcentra and Haegarda, sales in its immunoglobulin and albumin products fell victim to lower plasma collections, however, still came in ahead of analyst expectations.

Interim highlights included:

  • Gross profit margin down -3.4% to 57.1%

  • Net profit in constant currency down -5% to US$1,722m

  • R&D investment up 13% to US$486m

  • Net profit after tax down -2.8% to US$1,760m

  • HPV royalties were up 134%

Guidance reaffirmed

Based on an expected improvement in plasma collections and increased demand for flu vaccines, CSL has reaffirmed its guidance for FY 2022, with NPAT in the range of approximately US$2.15bn to US$2.25bn at constant currency.

However, this guidance now includes US$90m to US$110m in transaction costs related to the Vifor Pharma acquisition which was not originally factored in.

Goldman Sachs notes that while CSL reiterated its full-year guidance in net profit after tax - a reduction of up to 9% on the prior year - is effectively an upgrade.

“The target now includes the $US90 million to $110 million [in] transaction costs related to the proposed Vifor acquisition, hence effectively representing a 4 per cent to 5 per cent upgrade,” the broker noted.

Given management’s track-record for conservative guidance, plus current consensus expectations, the broker suspects today’s update allows scope for a better-than-expected full year result.

Looking forward

While plasma collections headwinds dampened the first half result, management expects plasma collections volumes to rebound due to greater social mobility measure and following a number of initiatives implemented by the biotech giant.

Management expects the recently implemented plasma collections network to underpin stronger sales in core plasma therapies.

Consistent with the seasonal nature of the business, management anticipates a loss in the second half of the year.

What brokers think

At present, CSL has a consensus Buy rating out of 15 analysts, with 10 recommending a Buy, 5 a Hold, and none recommend selling.

Consensus price target is $320.15.

Based on the target price of brokers that cover CSL (as reported on by FN Arena) the stock is currently trading with 21.3% upside to the current price.

  • At first glance, Macquarie notes CSL's interim profit was better-than-expected, with reduced operational expenses helping the bottom line. The broker has an Outperform rating and target price of $325.

  • With guidance confirmed today, following what Ord Minnett believes was "very strong" result, the broker sees upside risk. The broker notes net profits were “well above forecast, while operating expenses were a surprise.” The broker has a Hold recommendation, and $285 target price.

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