JP Morgan sees no step-change in Croda's growth profile, stays 'underweight'

Analysts at J.P. Morgan reiterated their 'underweight' stance on shares of Croda, telling clients that the strong growth seen in 2021 did not reflect a step-change in its long-term growth prospects.

Instead, they argued, it was chiefly driven by the temporary boost from Covid-19 vaccines, on top of a cyclical recovery.

Hence, although they did bump up their estimates for the specialty chemicals manufacturer's earnings per share in 2022 and 2023 slightly, they remained 5.3% and 14.2% below the Bloomberg consensus for those two years, respectively.

That also meant that the shares' valuation remained expensive despite the 28% pullback seen in their price year-to-date.

Factoring-in the announced sale of the bulk of its stake in Performance Technologies & Industrial Chemicals business, the shares were changing hands on an estimated 2022-2023 price-to-earnings multiples of 33.4 and 37.0, respectively.

That compared to median levels of 29.9 and 23.3 over the past three and five years.

J.P. Morgan had a 6,600.0p target price for shares of Croda.