Barclays downgrades Croda, says reaction to Pfizer news ‘overdone’

Barclays downgraded specialty chemicals company Croda International to ‘underweight’ from ‘equalweight’ on Thursday as it said the positive reaction to news it will supply excipients to Pfizer’s Covid-19 vaccine candidate "looks overdone".

"Our model suggests that the increase in value can only be justified in an unrealistic best case scenario," the bank said, adding that the vaccine news might even turn out to be a negative.

"First, a key positive catalyst is now gone. Second, it may trigger (further) rotation out of more defensive stocks.

"Croda's shares have rerated the most in our coverage over the past 12 months, having to a certain degree decoupled from fundamentals, in our view. We are more guarded on the outlook for the all-important personal care segment. This translates into the lowest projected total shareholder returns in the sector and also puts us 4% below Bloomberg consensus for the second half.

"Accordingly, we downgrade the shares to underweight."

Croda announced earlier in the week that it had entered into an agreement with US-based Pfizer to supply novel excipients used in the manufacture of a Covid-19 vaccine candidate.

Set to run for five years, the agreement awards Croda an initial supply contract for four component excipients used in the production of the vaccine candidate for the first three years of the contract.