GOLDMAN SACHS:Key takeaways1H21 strong: revenue/EBITDA/NPAT...

GOLDMAN SACHS:


Key takeaways

1. 1H21 strong: revenue/EBITDA/NPAT +2%/+24%/+25% ahead; driven by flu business. CSL delivered +44% earnings growth on a mid-teens top-line (+15%). In the core Behring division, revenues missed -1% as strength in albumin (+93% vs. cons +78%) was offset by a shortfall in IG (+7% vs. +14% despite strength in Hizentra +19%, as CSL noted only 'modest' growth in Privigen). Performance was broadly in-line across other Behring segments, although Haegarda +16% continues to exceed our own expectations. The entirety of the strong beat was driven by the vaccination business Seqirus (+38% revenue; +112% EBIT), largely driven by record orders in seasonal flu and a continued positive mix shift towards the QIV portfolio. As is customary, there will be a sharp sequential slowdown in Seqirus in 2H.

2. FY21 guidance reiterated (+0-8%). CSL has reaffirmed net income guidance of $2.17-2.265bn, which represents growth of +0-8% (GSe: $2.25bn). Whilst reassuring in isolation, the implied skew of 80:20 (1H:2H) is significantly more pronounced than recent history (60:40). Directionally, this trend had been broadly expected but consensus had under-estimated the magnitude. The stellar result in Seqirus has accentuated this dynamic, but perhaps more notably, management stated that reduced plasma collections in Covid-19 environment are leading to 'constrained sales and elevated COGS' in the Behring division. Whilst management has a long-standing reputation for conservative guidance, the current conditions are clearly very different to most and the company highlights that the key variable for the year is factors related to the progression of Covid-19. We remind investors that FY21 benefits from a proportion of albumin revenues returning in China following implementation of the new GSP license (this segment declined 36% in FY20 and, having grown +93% in 1H, is now expected to normalise in FY21, worth approximately +3ppt to YoY sales growth).

3. Plasma collection challenges remain. CSL confirmed that Dec-20 collections were -20% lower than in Dec-19 and that additional collection costs are still being incurred. Whilst the delta narrowed progressively through the year, considerable uncertainties clearly remain. Whilst the company does not disclose by segment, inventories grew +4% in 1H21, driven by raw materials +23%. We are sure that expectations for plasma availability in 2H21/1H22, with its various moving parts, will form a core focus for the call. The company is now pointing to the upper-end of previous guidance for +20-30 new collection centres in FY21 (it has confirmed 17 new collection centres were opened in 1H21, with a further 12 expected in 2H21). Whilst this may provide some additional relief against current collection challenges, most will still be in ramp up. Call at 10:00.

Exhibit 1 : 1H21 results summary

Source: Company data, Visible Alpha Consensus Data

Valuation: We are Buy rated on CSL with a 12m TP of A$329 based on our target NTM EV/EBITDA multiple of 30.1x