Chemicals firm Croda International PLC (LON:CRDA) has been downgraded to ‘hold’ from ‘buy’ by analysts at Berenberg, who said they saw only “muted” growth for the company in the short-term.
The German bank, which retained its 5,100p price target on the FTSE 100 group, said in a note on Thursday that the share price had reached their price target and there were now “few fundamental catalysts to drive a further re-rating”.
READ: Croda downgraded by Barclays as expectations are “too high”
Berenberg added that conditions in Croda’s personal care market remained “subdued” which was likely to cause slower organic growth, and as a result, the company’s focus was likely to “shift back to [mergers & acquisitions]”.
“Croda’s balance sheet has remained well managed despite deterioration in the company’s end-markets during 2019. With the company unlikely to return cash to shareholders in 2020 (having paid a special dividend in 2019), we believe the market’s focus will return towards how management will allocate capital to M&A”, the bank said.
“Croda’s strategy over the past two years has entailed pursuing smaller bolt-on deals, although talk of a more transformational deal has always remained in the background”, they added.
The downgrade sent shares in the firm 1.9% lower to 5,105p in mid-morning trading.