The CSL Ltd (ASX: CSL) share price hit a 52-week low of $253.95 on Wednesday. Since the end of July 2024, it has dropped close to 20%. Investors may be asking themselves whether this ASX blue-chip share is currently a buy-the-dip opportunity.
The business recently reported its FY25 half-year result, which clearly hasn't gone down well with investors.
Let's remind ourselves what the ASX healthcare share reported to the market and where the issues may be. Then, I'll consider if the major biotech company is a buy.
CSL earnings recap
In the first six months of FY25, at constant foreign exchange rates (CC), CSL reported revenue grew 5% to US$8.48 billion, underlying net profit (NPATA) increased 5% to US$2.11 billion, and net profit after tax (NPAT) rose 7% to US$2.04 billion. CSL also grew its dividend payout in Australian dollar terms by 16% to A$2.08 per share.
Looking at the divisions, CSL Behring's revenue grew by 10% to US$5.74 billion, CSL Seqirus' revenue fell 9% to US$1.66 billion, and CSL Vifor's revenue climbed 6%.
UBS believes that the performance of CSL's vaccine business (Seqirus) was disappointing. The broker is now projecting that Seqirus' sales will drop 7% in FY25, whereas it was previously expecting a fall of 3% for FY25 prior to the HY25 report's release. That's despite the inclusion of government contracts for bird flu (H5) pandemic readiness, without which CSL "would be at the very bottom end of its 5% CC revenue growth guide".
UBS suggested that sales cuts in vaccines mean lower profit margins as these businesses are exposed to scalable profitability.
The broker thinks Seqirus revenue missed the market's expectations by 10% as US market demand weakened again.
Is there hope for the vaccine business?
UBS gave some thoughts about where the vaccine business could go from here and how much its underlying vaccine sales could be impacted in FY25:
We think elevated flu cases in FY25 will likely drive something of a recovery in immunisation rates in FY26, but probably not back to FY24 levels. FY25 revenues will benefit from payments for government contracts related to H5 pandemic preparedness. The magnitude of these is undisclosed, but we model $150m in 2H and assume $60m in 1H. Ex these, we see FY25 vaccines sales down mid to high teens %. Our H5 contract estimates are uncertain, but we think are at least reasonably high margin. In general, margins tend to scale with sales in vaccines, so cutting our underlying mid term growth assumption from 5-6% to 4% after FY25 applies pressure to profits.
Is the CSL share price a buy?
The ASX healthcare share could still grow revenue and profit in FY25, but it's less than previously expected.
After seeing the result, UBS reduced its earnings per share (EPS) estimate for FY25, FY26, and FY27 by 5%, 4%, and 3%, respectively.
But, the broker still thinks CSL can grow its revenue to US$15.8 billion and increase its net profit to US$3.1 billion.
UBS rates the business as a buy with a 12-month price target of A$310, partly because it's trading at (only) approximately 21x FY26's estimated earnings. However, the analyst team at UBS did say they "sympathise with concerns on FY26 estimates". The broker currently forecasts US$3.65 billion of net profit in FY26.
Therefore, UBS suggests the CSL share price could rise by 21% in the next year. If that happens, that could be a compelling return. But it seems there are headwinds against a recovery in the short term.
