The CSL Limited (ASX: CSL) share price is set to go above $300 according to David Clark, an expert from Cameron Harrison.
According to reporting by the Australian Financial Review, the ASX healthcare share could get back to that milestone "before too long".
Clark thinks the outlook for the business is compelling and believes CSL can reverse the decline seen this year.
Since the beginning of the 2022 calendar year, the CSL share price has dropped by 9%. It has fallen along with many other ASX shares amid the intense market focus on inflation and interest rate rises.
In early trading on Friday, it is up 0.54% to $270.52.
So why the optimism about CSL? Let's have a look at what Clark said to the AFR about the healthcare business with a $130 billion market capitalisation (according to the ASX).
Plasma division margins predicted to recover
Clark noted that there are two key divisions within the business. The blood plasma division called Behring generates around 70% of revenue, and the influenza vaccine division called Seqirus generates around 26% of the revenue.
The investment professional said demand for CSL's blood plasma products remains "very strong" amid diminishing stockpiles during the pandemic. COVID-19 lockdowns and restrictions reduced accessibility of the donation hubs and "drastically" reduced donor rates for plasma.
Clark pointed out that the plasma division has higher fixed costs, so the COVID impacts hurt CSL's profit margins. He said this explained the "flat" CSL performance in the second half of the pandemic. The CSL share price is still 20% lower than its pre-COVID peak.
Cameron Harrison thinks CSL's plasma volumes will grow above pre-COVID levels in the second half of 2022 because of a few different tailwinds.
In the United States, higher payments to donors have helped stop a downward trend – Clark pointed out that CSL's plasma collections volume was up 18% in the FY22 first half. CSL said it plans to open 35 new centres in FY22.
Another tailwind, according to Clark, is that CSL's challenge on a ban on plasma donations by Mexican nationals on the B1/B2 visa was upheld last month, creating a potential tailwind into FY24.
The final potential tailwind for the plasma division that Clark referred to is that donations tend to rise when households have less disposable income.
If the US Federal Reserve's interest rate rises lead to higher unemployment, it could "help donor rates". As donation volumes rise, Cameron Harrison thinks there will be a "pronounced improvement" in the CSL profit margin, which could help the CSL share price.
Strong performance by Seqirus
The vaccine business has done better than expected, according to Clark. There was a bad flu season in the northern hemisphere and that's followed through to the southern hemisphere. This is helping drive revenue and earnings before interest and tax (EBIT).
Explaining the positive outlook for this side of the business, Clark said to the AFR:
The success of the mass-scale COVID-19 vaccination program appears to have flowed into increased consumer comfort towards flu vaccines, which we expect to underpin higher vaccination rates.
CSL share price snapshot
While the CSL share price has suffered in 2022, it's only down by 2% over the past month. It has also fallen around 5% over the past 12 months.
