UBS says buy CSL shares for a double-digit return in 2025

This ASX giant could create healthy returns, according to a leading broker.

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CSL Ltd (ASX: CSL) shares could be the source of strong investment returns over the next 12 months if some forecasts from UBS come true.

The ASX healthcare share is virtually at the same price where it was three years ago, as shown on the chart below. However, the next year could see the company reach an all-time high.

Created with Highcharts 11.4.3CSL PriceZoom1M3M6MYTD1Y5Y10YALL13 Sep 202113 Sep 2024Zoom ▾Jan '22May '22Sep '22Jan '23May '23Sep '23Jan '24May '24Sep '24202220222023202320242024www.fool.com.au

The recent FY24 result was pleasing – in constant exchange rate terms, revenue rose 11% to $14.8 billion, and net profit grew by 25% to $2.75 billion.

But, CSL may not be done there with profit growth if UBS is right with its predictions. As we know, profit growth can be a key catalyst for the CSL share price growth.

Shareholder returns forecast

A price target is where a broker thinks the share price will be in 12 months from the time of the broker note.

Of course, brokers don't have a crystal ball to know what's going to happen. They are predictions based on the broker's views of the company's outlook.

UBS currently has a 12-month price target for the CSL share price of $340, which implies a possible rise of around 12% in the next year. Considering the S&P/ASX 200 Index (ASX: XJO) has returned an average of between 8% and 10% per annum over the long term, CSL shares could outperform the ASX share market if the projection comes true.

CSL also pays a dividend, which would add to the total CSL shareholder return over the next year. UBS estimates that the ASX healthcare share could pay an annual dividend per share of US$2.96 in FY25. At the current exchange rate, in Australian dollar terms, that would equate to A$4.40 and a dividend yield of 1.4%.

Why is UBS optimistic about CSL shares?

A key element of the bullish view, including the buy rating, from UBS is that CSL is predicted to deliver sizeable profit growth in FY25 and beyond.

UBS is currently forecasting that CSL could make an annual net profit of US$3.4 billion in FY25, US$4 billion in FY26, US$4.8 billion in FY27 and US$5.5 billion in FY28.

In other words, CSL's profit is expected to grow by more than 10% in each of the financial years to FY28.

UBS thinks the Behring division "will do most of the work" in FY25, with a double-digit albumin sales forecast. However, UBS recently reduced its sales forecasts for Vifor, with generic launches in more countries and increased tendering.

While Seqirus's demand for flu vaccines is lower, CSL and UBS expect that demand to recover, with the low point expected in FY25.

UBS is not expecting CSL to make large acquisitions in the short term, and the broker is focused on the upcoming CSL research and development day in October, where the analysts hope to gain insights into potential strategic priorities in the pipeline.

CSL share price snapshot

Over the past year, the CSL share price has risen 12%.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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