Croda International PLC (LON:CRDA) has been upgraded to ‘buy’ from ‘hold’ by Liberum, with analysts citing the specialty chemicals group's “defensive” model during the coronavirus crisis.
The Liberum analysts also raised their target price for the FTSE 100-listed stock to 5,100p from 4,700p as they expect the group to be “the most resilient” in the UK chemicals industry this year, “as was the case in the 2007-2009 global financial crisis”.
READ: Croda International says performance was resilient in subdued market
The analysts noted that around 60% of sales at the speciality chemicals firm come from the “resilient” health, agriculture and personal care sectors, and only 10% come from auto and energy markets.
Croda's revenues and profit before tax are expected to drop by 4% and 8% respectively in the current financial year, they added.
The analysts said they think there is no need for Croda to scrap the dividend, potentially discussed at this week’s annual general meeting, because debt will not end up breaching covenants.
“Our sector team have a cautious view about the likely shape of the global economy after the lockdown phases are relaxed and are more inclined to believe we are heading for a W or U shaped recovery than a V in 2020- 2021,” the analysts added.
“In that context we think that earnings resilience, strong cashflow and low financial leverage are going to continue to be highly valued by investors.”
Croda shares rose 1% to 4,712p on Tuesday morning.