Sustainable Bio-Based Chemicals Will Expand In Asia And Latin America

Key Takeaways

• Leadership in sustainable, bio-based chemicals and ongoing green R&D positions Croda to capture higher-margin market share amid rising eco-friendly product demand.
  
• Strategic expansion into emerging markets and partnerships with local brands drive sales growth, geographic diversification, and enhance revenue stability.
  
• Exposure to persistent price pressure, operational inefficiencies, emerging market risks, regulatory uncertainty, and restructuring challenges threatens profitability and future growth momentum.

Catalysts

Engages in the consumer care, life science, and industrial specialty businesses in Europe, the Middle East, Africa, North America, Asia, and Latin America.

• Croda is leveraging its leadership in sustainable, bio-based specialty chemicals, with growing consumer and regulatory demand for eco-friendly and natural products supporting long-term revenue growth and margin expansion; ongoing innovation and R&D in green chemistry positions Croda to capture higher-margin market share from less-adapted competitors.
  
• Structural expansion into high-growth emerging markets (notably Asia and Latin America), combined with local manufacturing investments (e.g., surfactant plant in India, Solus in Korea), aligns Croda with global population growth, urbanization, and rising demand for personal care, healthcare, and agricultural products-driving future sales volume and geographic revenue diversification.
  
• A sharpened operational efficiency program-with increased savings target (£100 million annualized by 2027), commercial excellence initiatives, SKU rationalization, and supply chain optimization-is set to improve operating margins and net margins over the next several years.
  
• Deepening partnerships and increasing penetration among high-growth local and regional brands, especially in Beauty and Crop divisions, supports recurring revenue streams, reduces concentration risk, and enhances pricing power, all contributing to improved revenue visibility and earnings stability.
  
• Ongoing product pipeline expansion and innovation in key categories such as biotech-derived ingredients, ceramides, lipids for pharmaceuticals, and vegan-friendly actives, capitalizes on global trends in health, wellness, and advanced manufacturing-paving the way for future top-line growth and margin uplift as new products gain traction.

Croda International Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Croda International's revenue will grow by 5.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.4% today to 13.2% in 3 years time.
• Analysts expect earnings to reach £255.1 million (and earnings per share of £1.83) by about August 2028, up from £139.9 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as £205.3 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.7x on those 2028 earnings, down from 25.8x today. This future PE is greater than the current PE for the GB Chemicals industry at 21.9x.
• Analysts expect the number of shares outstanding to grow by 0.15% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.76%, as per the Simply Wall St company report.

Croda International Future Earnings Per Share Growth

Risks

• Exposure to ongoing price pressure in the least differentiated segments, such as lower-tier Crop and Beauty Care products, requires Croda to selectively reduce prices to regain market share, which could place sustained downward pressure on both revenue growth and net margins if this environment persists.
  
• Elevated and structurally high inventory levels suggest inefficiencies in working capital management; unless these are addressed, they risk tying up cash, increasing storage costs, and potentially leading to future write-downs that would negatively impact free cash flow and reported earnings.
  
• The company's continued expansion into Asia and other emerging markets-where Croda has less manufacturing presence versus Europe and North America-introduces risks of operational underutilization, challenges in ramping up new facilities, and heightened local competition, potentially impacting revenue and return on invested capital if these investments fail to meet ambitious growth targets.
  
• Uncertainty in the regulatory and funding environment for pharmaceuticals, especially in the U.S. (including slower approval processes and reduced public funding), could dampen growth prospects for Croda's higher-margin Pharma division in the medium and long term, negatively affecting both total revenue and earnings mix.
  
• The push to more aggressively rationalize warehousing and reduce management layers, though intended to deliver significant cost savings, may create integration risks, distract from innovation, or lead to costly asset impairments and restructuring charges, all of which could weigh on net margins and overall profitability during the transformation period.

Valuation

• The analysts have a consensus price target of £36.0 for Croda International 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 £52.0, and the most bearish reporting a price target of just £23.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £1.9 billion, earnings will come to £255.1 million, and it would be trading on a PE ratio of 24.7x, assuming you use a discount rate of 7.8%.
• Given the current share price of £25.81, the analyst price target of £36.0 is 28.3% 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.