Barclays raises target prices on Croda, Synthomer

Analysts at Barclays expect the European chemicals sector to post one of its strongest first quarters in some time, thanks to pre-buying as prices for raw materials rise and after product spreads widened to "remarkable" levels over the first three months of 2017.

They believed that combination of factors was enough to explain sector's recent strong share price performance, but harboured doubts about its sustainability.

Hence their preference for stocks offering longer term transformation potential, with Arkema their top-pick in the space.

Barclays also said it liked Croda (target raised from 3,600 to 3,700p) DSM (target revised from €70 to €71), Linde (target: €71) and Synthomer (target hiked from 481p to 495p).

Both Croda and Synthomer were kept at 'Overweight'.

Givaudan and Umicore on the other hand remained their key 'Underweights'.

On Croda, Barclays said: "The company is a major beneficiary of weak sterling, while the new US biosurfactant plant should support both growth and earnings from next year onwards. Raw material inflation is an upside risk to our forecasts, as is the deployment of the strong cash generation. We see the company as ideally positioned for bolt-on M&A."

For Synthomer, Barclays highlighted the new management team's "clear" M&A agenda and the fact that thus far they had executed well.

"The current, elevated, multiple reflects expectations that more deals are likely. Our analysis suggests most assets within Synthomer's scope can be accretive to earnings and returns."