Exane BNP upgrades Croda to 'neutral' on growth prospects

Exane BNP Paribas upgraded Croda International to ‘neutral’ from ‘underperform’ and raised its price target to 2,950p from 2,620p, noting the shares are close to fair value and pointing to potential catalysts such as M&A or a special dividend in the second half.

It said Croda has gained 12% year-to-date, underperforming the chemicals, ingredients and Food and HPC sectors on concerns over organic growth. However, Exane said that with recent initiatives starting to deliver, there are better times ahead, with underlying growth of around 3-4%.

Exane added that the company’s second-quarter results surprised with accelerating growth, driven by Personal Care and Performance Technologies. It said first-half margins remained solid thanks to Life Sciences and strong growth in NPP products, which now account for a record 26% of sales, versus 23% last year.

In addition, the bank said cash flow remained solid despite higher capital expenditure and a pension cash-out in the first quarter of around £20m.

At 1100 BST, shares in the company were up 1.7% at 3,000p.