Barclays has lifted its rating on Croda International PLC (LSE:CRDA) from 'equal weight' to 'overweight', citing the prospect of activist-driven restructuring and improved cost discipline as reasons for a more positive outlook.
The broker set a new price target of 3,100p, cut from 3,600p, but still implying 16% upside from the current level of 2,664p.
Shares in the specialty chemicals group have fallen about 70% since their 2021 peak, leaving the valuation at what Barclays described as “trough levels”.
Analysts said Croda’s £100 million cost-saving programme, up from an earlier £40 million target, could expand operating margins by as much as 400 basis points in a bull case.
They added that the arrival of activist investor Standard Latitude, which recently disclosed a stake of just over 5%, could accelerate portfolio reviews and divestments.
While concerns remain over underutilised manufacturing sites and an oversupplied lipid market, Barclays argued that Croda’s gross margins remain stronger than peers and that free cash flow generation offers valuation support.
The bank concluded that risks are now more balanced by restructuring opportunities, activist engagement and stabilising cash flows.
The shares were flat at 2,671p.