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Why the CSL share price just hit a record high

One of the big winners at the larger end of the market this reporting season has been CSL Limited (ASX: CSL). The share price of the biotech giant rose to a record 52-week high of $239.04 in Thursday morning trade and are now trading just shy of that at $238.90. Shares in CSL have now risen more than 8% since the release of its full-year result last Wednesday. 

FY19: Another record profit for CSL

For the 12 months ended 30 June 2019, CSL reported revenue of US$8,539 million and net profit after tax of US$1,919 million. At constant currency, CSL delivered an 11% increase in revenue and a 17% increase in net profit after tax. 

The main driver of top-line growth in FY19 was CSL Behring, which reported sales of US$7,187 million, an 11% improvement over FY18 at constant currency. The Immunoglobulins segment was the standout performer after it delivered above-market growth with sales increasing by 16% to US$3,543 million. A strong second half in China and the EU also resulted in albumin sales rising 15% to US$1,018 million.  

CSL continues to invest in its plasma collection network with 30 new centres opened in the United States during FY19. The company is also planning to open around 40 new centres in FY20. 

CSL’s Seqirus business also delivered a solid result for FY19. It reported revenue of US$1,196 million, a 12% increase at constant currency. The growth was driven by the 19% rise in sales of seasonal influenza vaccines. Earnings before interest and tax at Seqirus in FY19 rose 180% to US$154 million after margins grew 800 basis points from 4.8% to 12.8%. 

Outlook for FY20

Whilst CSL’s FY19 result was in line with expectations, it was management’s outlook for FY20 that pleased investors and has sent the stock higher over the last week.

CSL has forecast for FY20 net profit after tax to be between US$2,050 million and US$2,110 million, a rise of between 7% and 10% at constant currency. Headline revenue growth is projected to be around 6%.

However, revenue is forecast to rise 10% after adjusting for the General Supply Practice transition in China for albumin. The new distribution model is expected to have a one-off financial effect in FY20 of lowering sales by approximately US$340 million to US$370 million. The bottom-line effect is forecast to be in line with historical CSL Behring margins. 

At $239, CSL has a market capitalisation of around $108 billion and has surpassed BHP Group Ltd (ASX: BHP) in terms of the size on the ASX. Only the Commonwealth Bank of Australia (ASX: CBA) with a market capitalisation of $136 billion is larger on the local share market. 

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Tim Katavic owns shares of CSL Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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