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(Sharecast News) - Berenberg has raised its target price on Croda to £44.00 from £36.00, arguing that the key risks to the speciality chemicals group's post-pandemic recovery are continuing to recede following its latest trading update.
The broker said Croda's third-quarter results reinforced its increasingly positive view on the investment case, with both concerns about weak end-market demand and the company's ability to repair past execution issues becoming less pronounced.
Berenberg highlighted particularly strong momentum in Consumer Care, where organic sales growth was supported by a favourable mix, including a 19% increase in high-margin Beauty Actives sales. While it does not expect that level of growth to be sustained, the broker said it is becoming more confident that Consumer Care can deliver mid-single-digit annual growth over the longer term.
The analysts also pointed to improving prospects in Life Sciences, where growth in pharmaceutical ingredients, excipients and vaccine-related products helped offset ongoing weakness in Crop Protection. Berenberg believes Croda's healthcare portfolio could become a significant driver of margin expansion over the next two to three years, with a recovery in RNA-related markets expected to provide an additional tailwind from 2028.
Reflecting stronger margin assumptions in Consumer Care and the potential for future share buybacks, Berenberg lifted its earnings forecasts through 2028.
The broker added that Croda's valuation remains attractive, with the shares trading below historical averages despite its expectation of double-digit annual earnings growth over the coming years.
Reporting by Iain Gilbert at Sharecast.com
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