UK Croda upgraded to overweight rating on innovation – bank

26 June 2012 11:10  [Source: ICIS news]

LONDON (ICIS)--JP Morgan Cazenove has upgraded UK-based specialty chemicals company Croda International to its “overweight” rating, on the company’s strong emphasis on new product innovation, the investment bank said on Tuesday.

JP Morgan Cazenove said Croda’s notable characteristic through the 2008-2009 downturn was one of resilience, and believes that this is likely to continue.

The bank said Croda’s consistent emphasis on new product innovation and its positive outlook for 2012 will strengthen the company’s growth and should reassure investors.

The bank said the company’s second-quarter 2012 results, due on 24 July, are likely to reflect a continuation of positive first-quarter trends.

Croda’s first-quarter operating profit from continuing operations rose by 8.0% year on year to £65.8m ($102.8m, €82.3m) on higher sales in all major geographical areas.

JP Morgan Cazenove said that Croda’s consumer margins are near peak but are seemingly stable.

“The combination of newer products, and relatively robust pricing initiatives, should allow the high margins of around 30% to be maintained – or even go slightly higher as costs remain under control and price rises benefit the overall return,” the bank added.

The bank said that Croda’s target to increase earnings before interest and tax (EBIT) to 20% from 15% in the medium term is unlikely to be derailed, despite the tough industrial market in Europe.

JP Morgan Cazenove has also increased Croda’s share price target to £26, from £22.20.

At 09:22 GMT, Croda’s shares were trading at £21.72, up 2.21% from the previous close, on the London Stock Exchange.

(€1 = £0.80, $1 = £0.64)

By: Leigh Stringer
+44 208 652 3214

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