Broker tips: Man Group, Croda

The bank said Man has built a strong active multi-manager franchise, managing money across absolute return, total return and long-only strategies.

"Its key flagship strategies have consistently generated positive performance, which has helped Man attract higher net flows than the active management industry in recent years," it said. "Even though performance in the key flagship funds was weak in Q1 23, we have seen an improvement in recent weeks which bodes well for a better performance fee outcome in H2 23.

"Importantly, we expect Man to continue seeing strong net flows into alternative strategies, which we estimate should result in a management fee earnings per share compound annual growth rate of 15% between 2022 and 2026E, which in our view is not currently priced into its current valuation of 8.5x 2024E P/E."

Moreover, JPM said Man’s shareholder-friendly capital returns policy consisting of both ordinary dividends and buybacks should provide further support to the shares.

JPM’s adjusted EPS estimates are 6% below consensus in 2023 due to its more conservative cost assumption. However, it is 5% above consensus EPS for 2024 and 12% above for 2025, mainly on the back of share count reduction due to the expected buybacks.

Elsewhere, Berenberg cut its price target on Croda as it trimmed estimates a week after the specialty chemicals firm warned on profits, but maintained its ‘buy’ recommendation.

The bank, which reduced the price target to 66p from 80p, said big profit warnings from Croda are rare - as are good entry points.

"The last time the company issued a trading update remotely as bearish as the one of 9 June 2023 was on 24 June 2014, when industrials were a larger part of mix," it noted.

"The smooth journey for Croda over the difficult subsequent period for the chemicals sector - one of Chinese overcapacity, then the Covid-19 pandemic, then the European energy crisis - speaks for the robustness of the business.

"The recovery of shares, which closed at around 22p following the 2014 warning, suggests it is a good idea to buy on weakness. We understand that US order books show some signs of improvement, and survey data (see our consumer team’s China review) point to a solid outlook for China.

"Europe is not yet at the end of squeeze on discretionary incomes, but volumes should improve by the start of FY24."

Berenberg said the 20% cuts to its earnings per share estimates reflect lower sales volumes and prices in consumer care and crop protection, in addition to lower prices for by-product sales in the industrial specialities segment.