Want 20% upside in 2023? Citi says buy CSL shares

Now could be a good time to buy CSL shares…

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CSL Limited (ASX: CSL) shares have been having a rough time in recent weeks.

Despite pushing higher today, the biotherapeutics giant's shares are still down 5% since this time last month.

As a comparison, the S&P/ASX 200 Index (ASX: XJO) has risen approximately 1.5% over the same period.

Should you buy CSL shares?

The team at Citi appear to believe that CSL shares are trading at an attractive level.

According to a recent note, the broker has a buy rating and $340.00 price target on the company's shares.

Based on where its shares are trading at today, this implies potential upside of over 22% for investors over the next 12 months.

Citi is also expecting a modest 1.4% dividend yield in FY 2023, stretching the total potential return to almost 24%.

Why buy shares?

Citi is positive on CSL due to the improved trading conditions in the plasma industry. The broker explained this in a note last year following the release of updates from its rivals. It said:

Results from Grifols (June HY) and Takeda (June Q) show continued improvement overall in the operating environment for the plasma industry – this is as we anticipated and supportive of our CSL forecasts. The key points from the results were: 1) Demand is very strong, and prices are up mid-single digit, showcasing the pricing power of plasma companies; 2) Plasma collections are now well above pre-covid levels; 3) Plasma donor fees are coming down, helping margins.

The broker has since commented on the acquisition of Vifor Pharma, which completed last year. It commented:

The inaugural Vifor investor day was largely as anticipated. CSL gave investors a better appreciation for the rationale behind the deal: Vifor has the most extensive suite of products available in a large underpenetrated market, with a limited number of competitors, and unique industry partnerships.

All in all, its analysts are expecting the company to grow its earnings per share by 20% in FY 2023, then 23% in FY 2024, and 15.9% in FY 2025. This means CSL shares are changing hands at just 24x FY 2025 earnings, which Citi appears to believe makes them great value today.

Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. 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 Scott Phillips.

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