Croda International PLC (LON:CRDA) was downgraded to ‘underweight’ from ‘neutral’ by JP Morgan as analysts think the stock is too expensive.
Shares were up 7% on Tuesday on the back of an agreement with Pfizer Inc. (NYSE:PFE) to supply excipients, which are substances than improve the efficacy and delivery of the active pharmaceutical ingredients in a drug, to manufacture the US pharma company’s COVID-19 vaccine candidate.
These excipients come from the UK chemical company's recent acquisition of Avanti Polar Lipids.
According to the investment bank, the deal should be value-neutral as it will likely result in an earn-out payment of up to US$75mln to the previous owners of Avanti, which should broadly offset the three years’ earnings contribution from this vaccine.
The underlying earnings (EBIT) contribution should be around £25mln in the year to December 2021.
JP Morgan upgraded the target price to 5,700p from 4,250p which still implies a 15% downside potential.
“The stock reaction yesterday seems excessive to us… Fundamentally, we like the company but not the valuation,” analysts commented.
Shares dipped 2% to 6,549.19p on Wednesday morning.
