Croda International PLC (LSE:CRDA), the FTSE 100 speciality chemicals company, led the London market on Wednesday after Morgan Stanley upgraded the stock to overweight, sending shares up 4.3% to 2,860.5p.
The US investment bank lifted its rating from equal-weight, arguing that Croda is better positioned than most of its peers to protect profits during the current inflationary cycle by passing rising input costs on to customers more quickly.
Morgan Stanley estimates that raw material costs for Croda will increase by around 9% in 2026, driven by higher prices for bio-based inputs such as palm oil and rapeseed oil, as well as petrochemicals and packaging materials.
The bank argues Croda can absorb that pressure more effectively than rivals including Givaudan, Symrise and DSM-Firmenich because it relies less on long-term fixed contracts, allowing it to reprice quarterly rather than waiting up to six months.
Morgan Stanley raised its earnings per share estimates for Croda by around 4% for 2025 and 3.6% for 2026, and lifted its price target to 3,350p from 3,280p, implying further upside of around 17% from current levels.
The bank also noted that Croda's free cash flow is now sufficient to cover its dividend payments, and that its balance sheet remains relatively conservative, with net debt running at around 1.1 times forecast earnings before interest, tax, depreciation and amortisation (EBITDA) for 2026.