Best calls to action – Thursday, 17 February
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 17 February 2022, 6:00 AM
- Sectors Covered:
- Equity Strategy and Quant
CSL - 1H above expectations; the "tide is beginning to turn"
1H results were better than expected, albeit in line with management's assumptions, with net profit down 5% in cc on 4% revenue growth. Seqirus was the standout on pandemic driven demand for influenza vaccines, while Behring went backwards as plasma-based products were constrained on tight supply and higher costs, although certain Specialty product saw gains.
Promisingly, plasma collections continue to improve, although remain slightly below pre-pandemic levels, and while industry wide issues remain (eg Omicron; staffing; increase costs), the worst appears behind us.
While reiterated FY22 guidance sees 2H considerably softer (NPAT -13% to -33%), mainly on unfavourable Seqirus seasonality and higher costs, management flagged the bottoming of Behring GMs and is confident on future growth. We adjust FY22-24 estimates, with our price target decreasing to (login to view). Add.
Read our full reports and latest price targets on ASX:CSL here.
Corp Travel Limited - Look forward, not backwards
CTD's 1H22 result was in line with our forecast but was below consensus. Importantly the company generated positive EBITDA, strong cashflow conversion and has a strong balance sheet (no debt).
While January trading was impacted by the Omicron variant, pleasingly, activity is now improving and CTD expects a strong 4Q22. Our EBITDA forecasts are unchanged however NPAT is up slightly.
CTD remains our key pick of the travel sector. We reiterate our Add rating with a new (login to view) price target.
Read our full reports and latest price targets on ASX:CTD here.
Treasury Wine Estate - Now on a runway for growth
TWE reported an impressive 1H22 result given it had to cycle China earnings and the divested US commercial wine portfolio. COVID also continued to impact some of its higher margin channels.
The result materially beat our forecast but was in line with consensus expectations. Guidance implies that the 2H22 EBITS will be slightly lower than the 1H22 however it will be up strongly on the pcp.
The foundations are now in place for TWE to deliver strong double digit growth from FY23. Pleasingly, the benefits of its new divisional model are clearly evident. Trading at a material discount to our valuation and its pre-COVID multiples, we maintain an Add rating on this high quality company.
Read our full reports and latest price targets on ASX:TWE here.
Santos Ltd - Balance sheet no concern
We see the supportive oil price environment as capable of comfortably funding 2022 capex, while it will also be able to cut gearing through potential asset sales.
STO posted a steady 2H21 result in line with consensus, while setting reasonable FY22 production and sales guidance. We maintain our Add rating on STO which is a key sector preference.
Read our full reports and latest price targets on ASX:STO here.
Breville Group Ltd - 1H22 result: Full of beans
BRG's 1H22 earnings were above expectations. Sales momentum was sustained through 1H22 and EBIT margins were managed well in a 'turbulent' environment.
We think the pace of sales growth will continue to exceed that of the broader category as BRG steps up its investment in R&D and marketing and expands its geographic footprint. Our FY22 EBIT estimate rises 2% to $158m, slightly above guidance of c$156m.
Read our full reports and latest price targets on ASX:BRG here.
Pro Medicus Limited - Aiming for the clouds
PME recorded another result with strong growth across all metrics, driven by a glut of contracts with full period contributions, new implementations at or ahead of schedule, powering a material step-up in margins.
While revenues were in-line with our forecasts, EBIT margins (~65%) was really the standout, with a 600bp improvement versus our expectation of a 100bps decline on the pcp, where we assumed the resumption of major marketing conferences and travel expenses would curb margin growth. We were wrong.
Pipeline continues to strengthen in terms of depth as well as mix, while study volumes in the key US clients strengthen and at or above pre-pandemic levels. Really nothing to fault in the result and provided a healthy beat across our profit expectations.
Post the result, it is clear we have underestimated the operating leverage even as key expense lines resume which forms the basis of our slight upgrade. Over time we continue to forecast these margins to extend up to 80%.
As a result of our changes, our price target increases to (login to view) and view current prices as strong entry point with multi-year contracted revenue base providing earnings support and strong thematic tailwinds. Add retained.
Read our full reports and latest price targets on ASX:PME here.
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Disclaimer: Analyst may own shares. The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.