Berenberg lowers target price on Croda

Berenberg said that given the headline beat of roughly 2% versus full-year underlying earnings expectations, the approximately 5% fall in the share price triggered by Croda's results was "on first inspection surprising".

The German bank stated that the reason for the share price decline appeared to be that the volume driven sequential decline in underlying earnings margins in its consumer care division was only compensated for by roughly $20.0m higher-than-guided sales of polar lipids in and double digit-percentage volume and price growth in its crop care wing.

"At 27x 2023 P/E, Croda shares trade broadly in line with consumer peers such as Symrise and Givaudan, although we would argue that the growth, margins and barriers to entry on offer in the firm’s Pharma business are higher than in consumer ingredients," said Berenberg.

"Croda should benefit from a materially improved top-line growth rate at attractive returns from 2024 once the headwind from lower Covid-19-vaccine-related sales is absorbed and the personal care market recovers."

Reporting by Iain Gilbert at Sharecast.com