The company’s earnings are supported by innovation, strong pricing power, acquisitions and exposure to emerging markets, Deutsche Bank analysts wrote in an Aug. 22 note, raising the recommendation on the stock to buy from hold.
The stock rose as much as 4.4 percent to 2,679 pence, the highest intraday price since May 17. Deutsche Bank increased the price target for the Snaith, England-based company’s stock to 2,850 pence from 2,400 pence.
“Top-line growth has slowed over the past year,” Martin Dunwoodie, a Deutsche Bank analyst, said in the note. “We view this slowdown as cyclical rather than structural and expect sales growth to accelerate driven by a resumption of growth in crop care and personal care.”
Croda’s increasing focus on speciality products is driving an improvement in profit margins, Dunwoodie said. The chemical company bought a majority stake in Sichuan Sipo Chemical Co. of China for 38.2 million pounds ($60 million) this month to tap growing demand for car lubricant additives.
Croda was up 4.3 percent at 2,677 pence as of 10:54 a.m., taking its advance to 13 percent this year and giving the company a market value of 3.6 billion pounds. It was the biggest gain on the FTSE 100 Index (UKX) today.
Sipo will become part of Croda’s Performance Technologies division, which has come to the fore amid competition and a slowdown in growth in the cosmetic-ingredients business that was the main growth driver.
Of analysts who monitor Croda and share their research with Bloomberg, eight recommend buying the stock, seven advocate holding and three advise selling.
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