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Treasure Chest: CSL Plasma At Turning Point?

Treasure Chest | May 05 2021

This story features CSL LIMITED. For more info SHARE ANALYSIS: CSL

FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. As mobility across the US improves, attendance at CSL's plasma collection centres is turning around, providing more optimism about the outlook

-Channel checks suggest plasma volumes have stepped up
-Yields of immunoglobulin have increased
-Plasma supply expected to improve over the remainder of 2021


By Eva Brocklehurst

Is plasma collection finally turning around for CSL Ltd ((CSL))? Several brokers have noted increasing attendance at US plasma collection centres as mobility across the nation improves.

Macquarie increases second half forecasts for FY22 to allow for higher immunoglobulin revenue, noting foot traffic in plasma collection centres has risen substantially in recent weeks and is now at the highest levels across its data series.

As a result, the broker has upgraded CSL to Outperform. Improvement has been evident across key states and this has coincided with reductions in new coronavirus cases in the US and the ongoing administration of vaccines across the US population.

Taking this a step further, Jarden notes vaccination numbers are climbing in the US and encouraging the population to go about business in a more normal fashion. Mobility trends are improving and time spent at home trending lower.

In channel checks Jarden, too, notes plasma volumes have stepped up. There is also a slowdown in the third round of stimulus payments, which have been suspected as hindering attendance at plasma donation centres.

Furthermore, yields of immunoglobulin have increased with the extended time lapse between donations allowing plasma proteins in the body to be replenished and, as a result, improve yields.

Hence, the broker suggests the interplay between vaccinations and mobility is starting to resonate in those healthcare stocks that have been left behind, notably CSL for which Jarden, not one of the seven stockbrokers monitored daily on the FNArena database, has an Overweight rating and $334.80 target.

Still, the broker cannot be certain a recovery is underway until there is further anecdotal or data-driven evidence about the sustainability of trends. Macquarie agrees uncertainty exists regarding the plasma collection profile but assumes a more rapid recovery over the remainder of 2021 and believes increased plasma collections will drive the share price over the short term.

Underscoring broker analyses, competitor Grifols reported first quarter results and noted US plasma collections are gradually recovering, stating lower sales of plasma-derived products have been partially offset by mid-single digit price increases.

Wilsons, also not one of the seven, rates CSL Overweight with a target of $320 and points out the current period is the low point for industry product supply, which should recover from the second half of FY22.

In support of this view the broker recalls CSL attendance data in the first half results and notes that fractionation and purification processes take nine months to complete. The Grifols results are broadly consistent with what Wilsons is modelling for CSL's plasma division.

Morgan Stanley stresses that CSL's December US collections were -20% below pre-pandemic levels while a combination of US stimulus checks and bad weather suppressed a recovery for much of the March quarter, and possibly into April. Thus the broker remains cautious and retains an Equal-weight rating for CSL.

Terumo Collaboration

Things are improving on another front as CSL has announced a collaboration with Terumo to develop a new plasma collection platform. Macquarie expects yield benefits will accrue from FY23, providing incremental improvement to gross margins.

FNArena's database has five Buy ratings and two Hold. The consensus target is $299.04, suggesting 7.3% upside to the last share price.

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