Is the CSL share price a bargain heading into May?

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Key points

  • CSL shares edge 1.28% lower to $265.89 following a broader market sell-off 
  • The company performed in line with expectations for its half year results 
  • A number of brokers believe the CSL share price is attractively valued 

CSL Limited (ASX: CSL) shares have had a woeful couple of weeks, dragged down by the broader ASX market.

Despite navigating its way through challenging market conditions caused by COVID-19, the company posted a solid set of numbers from its half year results.

At Wednesday’s market close, CSL shares finished 1.28% lower at $265.89. For context, the S&P/ASX 200 Index (ASX: XJO) fell 0.78% to 7,261.20.

Below, we take a look at CSL’s most recent financial update and how brokers are viewing the global biotech’s shares.

How did CSL perform for the first half?

For the first half of FY22, CSL reported that COVID-19 tampered with the performance of CSL Behring while boosting its Seqirus business.

In particular, revenue from CSL Behring stood the same when compared to the prior corresponding period. However, its Seqirus business delivered robust growth, achieving a 17% increase in revenue over H1 FY21.

The company stated that global demand for its therapies remains strong, particularly with significant growth in seasonal influenza vaccines. The latter is due to the COVID-19 pandemic driving high rates of people getting protected from the flu.

Despite the difference, both segments contributed to a 4% lift in revenue to US$6,041 million.

Nonetheless, group earnings before interest and tax (EBIT) fell 8% to US$2,215 million caused by a number of increased costs. This included research and development expenses as trials resumed post the COVID-19 pause. Management is forecasting these costs to take up estimated FY22 revenue of between 10% to 11%.

Overall, the company recorded a 2.8% drop in net profit after tax (NPAT) to US$1,760 million.

What were the challenges?

While the results themselves were in line with expectations, CSL revealed that it also continues to face some challenges.

It stated that its core franchise, the immunoglobulin portfolio, has been impacted by industrywide constraints on collecting plasma in FY21.

Nonetheless, CSL responded by implementing multiple initiatives across its plasma collections network. This has given rise to significant improvement in plasma volumes collected.

It noted that plasma numbers were 18% higher than H1 FY21, but still slightly down on 2019 levels.

CSL opened 18 new facilities in the first half of FY22 to attract lapsed and new donors through its doors.

For the remainder of the financial year, the company plans to open another 35 centres, expanding its presence, mostly across the United States.

What do the brokers think?

After reporting its first half results, a number of brokers rated the company with varying price points.

The team at Morgans cut its price target for CSL shares by 2.1% to $327.60.

In addition, Macquarie had a similar outlook, raising its rating by 0.8% to $327.50.

Based on both brokers, this implies a potential upside of around 23% based on the current CSL share price.

However, on the other side of the scale, Morgan Stanley raised its price target by 7.9% to $302.

Furthermore, RBC Capital Markets slashed its view by 1% to $296 apiece.

The most recent broker note came from RBC Capital Markets earlier this month, slashing its view by 1% to $296. In contrast, this still implies an upside of about 11.3% from where CSL shares trade.

CSL share price review

Over the past 12 months, the CSL share price has seesawed following mixed investor sentiment across the market.

The company’s shares touched a 52-week high of $319.78 in November, before falling to a 52-week low of $240.10 in February.

Based on current valuations, CSL has a market capitalisation of roughly $128.08 billion.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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