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Croda double-upgraded by Goldman Sachs on cosmetics comback and new mRNA opportunities

The comeback for consumer care after several lacklustre years is expected to be driven by “a rebound in volumes, raw material inflation, M&A and the strong long-term outlook for key customers”

Croda International PLC -

Croda International PLC (LON:CRDA) shares were given a lift by Goldman Sachs, which upgraded the chemicals group over an expected “comeback” for the consumer care sector and opportunities in mRNA technology accelerating on the back of the coronavirus pandemic.

The FTSE 100 chemicals group, which supplies to industries as diverse as cosmetics, life sciences, automotive and food packaging, was double-upgraded to ‘buy’ from ‘sell’ by the US investment bank, with a 12-month share price hiked to 8,000p from 5,750p.

With a more optimistic outlook in consumer care (CC) and life sciences (LS), “where we see a confluence of tailwinds in cosmetics and skincare, Ag [agrochemicals] and patient health care accelerating growth”, Goldman lifted its underlying profit forecast for 2021/2022E 7% and 11%.

CC and LS sales have grown at -1% and +4% respectively over the last three years, but the analysts estimate this will pick up to 8% and 11% over 2021/22.

The comeback for CC after several lacklustre years is expected to be driven by “a rebound in volumes, raw material inflation, M&A and the strong long-term outlook for key customers” and the analysts said they think the quality of earnings momentum should be a stock catalyst.

They also believe LS strength will last longer than expected and see “additional potential applications in mRNA technology accelerating post pandemic”.

Croda recently began a strategic review of its performance technologies & industrial chemicals businesses, having spent almost £1bn on two acquisitions in the fragrances and drug delivery markets last year, which the analysts said “provides an opportunity for an improved valuation for CC and LS”.

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Price: 8840 GBX

Market Cap: £12.33 billion

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