The CSL Limited (ASX: CSL) share price is in the red for 2022. Should investors now view it as an opportunity?
As one of the ASX's largest businesses, what happens to CSL can have a sizeable impact on the S&P/ASX 200 Index (ASX: XJO).
Despite the business benefiting from a strong performance from its vaccine business in FY22 (with 13% revenue growth), it actually saw its net profit after tax (NPAT) fall to $2.25 billion, a fall of 6% in constant currency terms.
What went wrong?
One of CSL's biggest ever profits is not exactly a disaster. But, with the tailwinds that the healthcare industry has (such as ageing demographics), investors may have been hoping for a positive year considering the revenue increased by 3%.
Management said the profit was at the top end of its guidance, but that its performance was as expected in a difficult global environment.
Part of the equation was that there was "significant growth" in its research and development spending. While it's a cost in the short term, it can unlock future profit generation.
The company noted that in FY21, its plasma collections were impacted by the pandemic, which limited its sales of core plasma therapies in FY22, given the "long-term nature" of its manufacturing cycle.
It also said that as the 2022 financial year progressed, it grew collections significantly, though at a higher cost. Collections grew by 24%, which it expects will "underpin strong sales growth in its core plasma products."
How will the CSL share price turn around?
Management is confident that things are going to be better in FY23. The CSL CEO and managing director Paul Perreault said:
We have continued to invest in all facets of our business and I am very encouraged by the improved momentum we are seeing in our core Ig franchise.
The strong growth we have seen in plasma collections is anticipated to continue as COVID recedes and underpin strong future sales growth in our core plasma therapies. The current higher cost of plasma is also expected to prevail into FY23.
We anticipate our influenza business, CSL Seqirus, to deliver another strong year driven by demand for its differentiated products.
CSL's net profit after tax for FY23 is anticipated to be approximately $2.4 billion to $2.5 billion at constant currency, returning to strong sustainable growth.
Fund manager believes in the future
Some experts are still backing the CSL share price in their portfolios. For example, Wilson Asset Management analyst Anna Milne on a recent webinar, according to Livewire, made the following comments about CSL when talking about three ASX shares:
All three of these names are the highest quality names in their respective sectors.
CSL is arguably one of the highest quality names on the ASX, given its defensive earnings profile over the coming decade.
…their turnarounds are just starting to happen. When companies have been through tough periods and they're coming out of them, it's the perfect recipe for us. You have the earnings upside, and then you also have the sentiment. So that's positive for both valuation and earnings, which translates to higher share prices.
Another reason to be positive about CSL is the new Rika device, which is more comfortable for patients to extract plasma and quicker for staff to use.
CSL share price snapshot
CSL shares have fallen 4% since 8 September 2022.
