The CSL Limited (ASX: CSL) share price has struggled since the start of 2022. It's down over 13%. Does that mean that the ASX healthcare share is cheap?
It's now lower than it was at the bottom of the COVID-19 crash.
What's going on with the CSL share price?
My colleague Tony Yoo has quoted the fund manager Jun Bei Liu from investment manager Tribeca.
She said pointed out that healthcare names have underperformed, not because of the war but because they were expensive companies relative to other sectors.
There is also the prospect of much faster interest rate hikes to combat the high level of inflation that the world is seeing.
Billionaire Ray Dalio from investment group Bridgewater Associates once said about interest rates:
It all comes down to interest rates. As an investor, all you're doing is putting up a lump sum payment for a future cash flow.
The CSL share price initially rose after investors got a look at the result, but it has since dropped back.
To be able to call something "cheap", knowing how much profit a business is generating can be useful.
FY22 half-year result
CSL reported a net profit after tax (NPAT) of $1.67 billion for the first six months of FY22, which was down 5% in constant currency terms. However, revenue was up 4% in constant currency terms.
Management said that was strong growth in a number of areas for the business, whilst HPV royalties rebounded strongly (up 134%). Seqirus, the influenza vaccine business, was one of the segments that saw a strong performance with revenue up 17% in constant currency terms.
Ig and albumin sales were limited by constrained plasma collections in FY21.
In FY22, the net profit is expected to be in the range of between $2.15 billion to $2.25 billion at constant currency.
The interim dividend was increased by 8% in Australian dollar terms to A$1.46 per share.
Acquisition
The company also recently announced that it was acquiring Vifor Pharma, a global specialty pharmaceutical company with leadership in renal disease and iron deficiency.
Management said this will represent a meaningful acceleration of its 2030 strategy by further enhancing its focus on therapeutic leadership areas, innovation and sustainable growth.
Is the CSL share price a cheap buy?
When talking about CSL, Resmed CDI (ASX: RMD) and Cochlear Limited (ASX: COH), the fund manager Liu said:
All of them have reported pretty good numbers… And since then the share prices have come off again
All of that together makes these companies absolute standouts. When there's a rebound it is these companies that will be the first ones to move [upwards]. They have pricing power. They can apply faster price increases so that their earnings growth is not going to be impacted. These companies will continue to grow.
Plenty of brokers also think that CSL is a buy, such as Citi, with a price target of $335. Morgans is another broker with a positive outlook – it rates CSL as a buy with a price target of $327.60.
On Citi's numbers, the CSL share price is valued at 30x FY23's estimated earnings.
