HSBC upgraded Croda to ‘buy’ from ‘hold’ on Thursday and hiked the price target 8,600p from 6,100p as it argued that the specialty chemicals group’s strong near-term trading environment should continue to support the recent re-rating.
The bank said it had detected a transformation that could accelerate long-term growth at the company.
“We detect that Croda is changing. The major vaccine success is a clear and growing boost to Life Sciences, while the successful integration of fragrances, a strategic review of Performance Technologies and recovery in consumer markets – combined with its ESG credentials defined by ongoing sustainability – suggest an accelerating internal momentum,” it said.
HSBC said this should help revenue growth, margins and cash flows.
It added that the success in supplying lipid nanoparticles for Pfizer’s messenger RNA-based Covid-vaccine is now well documented.
“There is the possibility of an increase in the size of the uptake as Pfizer has been raising its own production target (Pfizer estimates 3.0bn doses will be manufactured in 2021 vs the earlier 1.6bn it released in mid-May).
“However, this should not disguise the underlying success in growing customer demand for its range of adjuvants, excipients and broader medical uses in areas such as oncology treatments and further vaccine work.”
