Efficiency Program Will Save EUR 50 Million Through Digitalization And AI

Key Takeaways

• Symrise aims for significant organic growth by expanding regionally and leveraging investments in capacities and technologies for earnings enhancement.
  
• Efficiency programs and digitalization are prioritized to improve net margins, with bolt-on acquisitions enhancing product diversification and market position.
  
• Geopolitical shifts, inflation, and challenges in foreign exchange, pet food, ESG, and volatility affect Symrise's growth and earnings stability.

Catalysts

Supplies fragrances, flavorings, cosmetic active ingredients and raw materials, and functional ingredients in Europe, Africa, the Middle East, North America, the Asia Pacific, and Latin America.

• Symrise is confident in delivering 5% to 7% organic growth for 2025, attributing this to a strong start of the year and regional expansion efforts, implying a positive impact on future revenue growth.
  
• The company is implementing an efficiency program aimed at saving €50 million and targeting lasting efficiency gains, which could improve net margins by reducing costs and improving productivity.
  
• Symrise plans to continue investing in capacities, technologies, and aligning its investment with market demand, indicating a focused strategy to drive earnings growth through new opportunities and expansion.
  
• The incorporation of digitalization and AI in operations is viewed as a key lever for change, potentially leading to improved operational efficiencies and better net margins as the company streamlines processes.
  
• Symrise aims to strengthen its portfolio and considers bolt-on acquisitions as part of its strategy, which could accelerate revenue growth by diversifying its product offerings and increasing market share.

Symrise Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Symrise's revenue will grow by 5.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.0% today to 11.3% in 3 years time.
• Analysts expect earnings to reach €650.6 million (and earnings per share of €4.63) by about February 2028, up from €392.4 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €559 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.9x on those 2028 earnings, down from 35.2x today. This future PE is greater than the current PE for the GB Chemicals industry at 25.5x.
• Analysts expect the number of shares outstanding to grow by 0.21% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.14%, as per the Simply Wall St company report.

Symrise Future Earnings Per Share Growth

Risks

• Ongoing geopolitical changes and high inflation rates continue to pressure businesses, potentially impacting Symrise's ability to maintain its revenue growth.
  
• The negative impact of foreign exchange rates, especially highlighted by the detriment from the Argentinian Peso, can affect Symrise's reported revenues and profits.
  
• Challenges in the Pet Food market, particularly from price changes in egg proteins, might affect the segment's growth and profitability. This could impact Symrise's net margins.
  
• The pressure to meet new ESG reporting requirements could increase operational costs and impact net earnings.
  
• The company's reliance on aroma molecules and backward integration strategy may lead to volatility in Scent & Care's performance, impacting overall earnings stability.

Valuation

• The analysts have a consensus price target of €119.71 for Symrise based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €137.0, and the most bearish reporting a price target of just €105.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €5.8 billion, earnings will come to €650.6 million, and it would be trading on a PE ratio of 29.9x, assuming you use a discount rate of 5.1%.
  
• Given the current share price of €98.72, the analyst's price target of €119.71 is 17.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.