The CSL Limited (ASX: CSL) share price is up after the healthcare company improved its FY21 profit expectations.
CSL is the ASX’s largest business. It specialises in plasma and biotherapies, including vaccines.
CSL upgrades its FY21 expectations
The biotech giant is holding its annual general meeting (AGM) today. Included in the presentation was an upgrade for its profit expectation.
CSL is now expecting profit to grow in the range of 3% to 8% to US$2.17 billion to $2.265 billion. Profit growth was previously expected to be in a range of 0% to 8%. So whilst the top end of the guidance is still expected to be 8%, the company’s mid-point of guidance has increased.
The profit growth is going to be helped by revenue growth in the range of 6% to 10%.
CSL is expecting strong demand for its plasma and recombinant therapies over FY21. Seqirus is expected to continue to benefit from its differentiated products and strong demand for flu vaccines, driven by the government want to protect people from both COVID-19 and the flu.
Sales of albumin are expected to normalise after the successful transition to the new business model in China.
The company continues to invest in its normal research and development, as well its COVID-19 response, so it’s expecting to spend more on R&D this year. But it will still be within 10% to 11% of revenue as it has previously guided.
On the negative side relating to plasma, COVID-19 restrictions are expected to restrain its ability to collect plasma and there will be higher collection costs. However, CSL has multiple initiatives to mitigate this impact.
But CSL’s existing multi-year trials – which were paused to ensure patient safety – are expected to make up lost time as the pandemic recedes. CSL also said that demand remains strong right across its portfolio, especially for influenza and immunoglobulin products.
Summary
CSL continues to impress the market. The fact it can keep growing the underlying business whilst also developing the COVID-19 response is testament to its focus and quality.
I think CSL is one of the highest quality businesses on the ASX. The CSL share price certainly isn’t cheap. CommSec estimates put it at 35 times the estimated earnings for the 2023 financial year. But remember it continues to invest heavily in R&D, which is key to unlocking future products. Without that R&D expense, CSL’s valuation would look more reasonable.
CSL could be worth a small buy today, and buying more on dips. However, it’s so large that I think there are other ASX growth shares I’d rather buy first like Pushpay Holdings Ltd (ASX: PPH) or Bubs Australia Ltd (ASX: BUB).
