Goldman Sachs upgraded its stance on shares of Croda International to ‘buy’ from ‘sell’ and hiked its price target to 8,000p from 5,750p as it said the risk/reward was “positively skewed”.
The bank also lifted its FY21/22 estimate for adjusted EBIT by 7%/11% on its “more optimistic” outlook in Consumer Care (CC) and Life Sciences (LS), where it sees a confluence of tailwinds in cosmetics and skincare, Ag and patient health care accelerating growth.
“We see a strong inflection ahead for CC driven by a rebound in volumes, raw material inflation, M&A and the strong long-term outlook for key customers,” Goldman said. “With CC staging a comeback after several lacklustre years, we think the quality of earnings momentum should be a stock catalyst.”
The bank also said it believes strength in the life sciences segment will be longer-dated than expected and there is additional potential applications in mRNA technology accelerating after the pandemic.
In addition, GS said Croda has an undemanding valuation. It noted that Croda has underperformed EU consumer peers by 3% year-to-date despite 5% consensus EBITDA upgrades versus peers.
“On 18x 2022E EBITDA and 29x price-to-earnings, it trades at a 14% discount to EU consumer peers and a 19% discount to our sum-of-the-parts.”
At 1055 BST, the shares were up 3% at 7,042p.
