Analysts at Credit Suisse have slapped an outperform rating on shares in biotechnology company CSL Limited (ASX: CSL).
The analysts have raised their share price target to $150, approximately 6% higher than Thursday's closing price of $140.95.
CSL shares are up 34% over the past year as demand grows for its immunoglobulin and specialty products and margins continue to expand.
In August, CSL posted a net profit on a constant currency basis of $US$1,337 million, an increase of 24% on FY2016. The company issued FY2018 guidance for net profit after tax to grow between 11% to 16% at constant currency.
2018 Capex and potential
The Melbourne-based company has ended its successful share buyback program in order to redeploy funds to a large capex program of between US$900 million and US$1 billion.
The capex program will focus on enhancing the company's growth prospects. The company plans to expand its fractionation capacity, increase its number of collection centres, and enlarge capacity for manufacturing specialty products such as Haegarda and Berinert.
The acquisition of Chinese plasma fractionator Ruide in August should also contribute to earnings growth. The Chinese market is the fastest growing immunoglobulin market in the world with demand predicted to increase sharply over the next decade.
CSL's Haegarda treatment for Hereditary Angioedema is also expected to be a lucrative earner over the next several years as it was launched in July with a 7-year orphan exclusivity issued from the Food and Drug Administration. Seqirus, CSL's influenza vaccine division is also growing revenue and is on the path to profitability according to management.
Foolish takeaway
At current prices, CSL shares are not cheap, trading at approximately 31x estimated earnings of $4.50 a share. CSL is a high-quality business with plenty of upside that has an excellent track record in delivering growth which justifies a premium to the general market.
CSL, along with ResMed Inc. (CHESS) (ASX: RMD) remain two of Australia's greatest companies with excellent growth prospects in the global biotechnology industry.
