Berenberg cuts Croda price target, keeps at 'buy'

(Sharecast News) - Berenberg cut its price target on Croda on Thursday as it trimmed its estimates a week after the specialty chemicals firms warned on profits, but maintained its 'buy' recommendation. The bank, which reduced the price target to 66p from 80p, said big profit warnings from Croda are rare - as are good entry points.

"The last time the company issued a trading update remotely as bearish as the one of 9 June 2023 was on 24 June 2014, when industrials were a larger part of mix," it noted.

"The smooth journey for Croda over the difficult subsequent period for the chemicals sector - one of Chinese overcapacity, then the Covid-19 pandemic, then the European energy crisis - speaks for the robustness of the business.

"The recovery of shares, which closed at around 22p following the 2014 warning, suggests it is a good idea to buy on weakness. We understand that US order books show some signs of improvement, and survey data (see our consumer team's China review) point to a solid outlook for China.

"Europe is not yet at the end of squeeze on discretionary incomes, but volumes should improve by the start of FY24."

Berenberg said the 20% cuts to its earnings per share estimates reflect lower sales volumes and prices in consumer care and crop protection, in addition to lower prices for by-product sales in the industrial specialities segment.