CRDA: Activist Pressure Will Drive Future Reappraisal Of Margin Resilience

The analyst price target for Croda International has edged higher to approximately £31.00. This reflects modest improvements in forecast growth and valuation multiples as analysts point to stabilizing end markets and potential upside from strategic and activist driven initiatives, despite mixed target revisions across the Street.

Analyst Commentary

Street views on Croda International remain mixed but are gradually skewing more constructive as price targets edge higher and ratings tilt toward the positive, even as some caution on execution and valuation persists.

Bullish Takeaways

• Bullish analysts highlight incremental target increases into the low to mid 3,000 GBp range as evidence that earnings expectations and confidence in the recovery path are improving rather than deteriorating.
• Upgrades into more positive rating categories point to growing conviction that fears around commoditization and margin compression may be overstated, supporting potential for a re-rating if volumes recover.
• Some see activist pressure and portfolio actions as potential catalysts for better capital allocation and sharper strategic focus, which could unlock value and support higher long term growth multiples.
• Despite trimmed headline targets in some cases, the retained positive stance suggests upside risk to current forecasts if end markets stabilize faster than currently modeled.

Bearish Takeaways

• Bearish analysts are trimming previously more aggressive price targets, reflecting concern that the pace of earnings recovery may be slower than hoped and that near term growth expectations might still be too optimistic.
• Neutral and Equal Weight stances indicate that, at current levels, Croda is seen by some as fairly valued, with limited upside until there is clearer evidence of sustainable volume and pricing momentum.
• Persistent debate around the degree of commoditization in parts of the portfolio continues to cap valuation, as investors wait for proof that the mix will hold or improve without eroding returns.
• Some caution that activist involvement, while potentially constructive, could also introduce execution risk and strategic uncertainty in the short term, tempering enthusiasm for a rapid re-rating.

What's in the News

• Croda International issued new guidance for the fourth quarter of fiscal 2025, noting that absolute Q4 sales will be seasonally lower than in the first three quarters as customers manage working capital into year end. (company guidance)
• Despite the expected seasonal dip in Q4 sales, Croda continues to anticipate GBP 265 million to GBP 295 million of group adjusted profit before tax at constant currency for fiscal 2025, supported by solid year to date sales growth and cost savings. (company guidance)
• The company reiterated its full year 2025 guidance, indicating management’s view that existing initiatives and market trends are sufficient to meet prior financial targets. (company guidance)

Valuation Changes

• Fair Value: Unchanged at approximately £34.46 per share, indicating no revision to the intrinsic value estimate.
• Discount Rate: Fallen slightly from about 7.91 percent to 7.89 percent. This implies a marginally lower perceived risk profile or cost of capital.
• Revenue Growth: Risen slightly from roughly 4.76 percent to 4.83 percent, reflecting a modestly more optimistic outlook on top line expansion.
• Net Profit Margin: Eased marginally from about 13.06 percent to 13.00 percent, suggesting a slightly more conservative view on profitability.
• Future P/E: Edged up from around 24.21x to 24.26x, pointing to a very modest increase in the valuation multiple applied to forward earnings.