While 2025 has been difficult for the CSL Ltd (ASX: CSL) share price to date, some analysts are optimistic that the business can deliver strong returns and mount a recovery.
The market saw some weakness in the CSL FY25 result. The ASX biotech share is also under a cloud of what changes could occur in the US healthcare space under President Trump's administration, considering CSL's vaccine business (Seqirus) is an important part of the company.
In the FY25 result, CSL reported total revenue growth of 5% to $15.6 billion, with Behring delivering 6% revenue growth to $11.2 billion, Seqirus delivering 2% revenue growth to $2.2 billion, and Vifor achieving 8% revenue growth to $2.2 billion.
The company was able to report underlying net profit (NPATA) growth of 14% to $3.3 billion and net profit growth of 17% to $3 billion. Broker UBS described this as a "low quality" profit because it was based on lower tax and research and development spending, as well as Seqirus sales.
Strong returns predicted for CSL shares
UBS said that CSL is "bruised not broken" after seeing the result, with the reaction reflecting operating growth concerns after a disappointing Behring performance and a greater focus on cost savings. The broker believes this "created an overreaction to a modest compositional change in CSL's 3-year EPS growth".
UBS said the CSL share price is "undervalued in a status-quo operating environment", trading on a forward price-earnings (P/E) ratio of 20.
But, the UBS analysts did note that market confidence may not come back about the Behring division during 2025. The broker also pointed out ongoing earnings risks from the Trump administration relating to US tariffs and the desire for the US to get 'most favoured nation' (MFN) prices on healthcare products, which would hurt CSL's ability to make as much profit on its operations in that country.
The broker said it's forecasting the company's earnings per share (EPS) could rise at a compound annual growth rate (CAGR) of 14% per annum over the next three years, excluding any impacts from tariffs or the MFN push.
Due to that, UBS has an optimistic view on the CSL share price. It has a price target of $300 on the business, which is where the broker thinks the valuation could be in 12 months. At the time of writing, the broker implies the CSL share price could rise by approximately 40% in the next year.
Both CSL and UBS believe that plasma products will be exempt from US tariffs, and it's too early to judge the likely implementation pathway for the MFN policy.
Why the broker thinks the ASX healthcare share is undervalued
If the CSL share price does rise to $300, it would mean it'd be trading at 23x FY27's estimated earnings. While that would be above the current forward P/E ratio of 20, it'd be "well below its 10-year average of 30x on broadly similar EPS growth outcomes".
So, the business would still be trading at a relatively low P/E ratio in historical terms if it does rise 40%, based on what UBS is suggesting.
