Barclays upgrades Croda on activist investor, cost cutting plans

Investing.com -- Barclays upgraded Croda International to Overweight from Equal Weight, saying activist investor involvement and cost-cutting plans could help turn around the specialty chemicals group after a sharp share price slide in recent years.

Croda’s shares have fallen about 70% from their late-2021 peak, underperforming the FTSE 100’s 26% gain over the same period.

Barclays said the entry of activist fund Standard Latitude could mark a “potential turning point,” as it brings pressure for strategic changes, including divestments.

“With valuation at trough levels, cost discipline expanding, and now the potential for activist driven divestments, we think Croda’s risk reward now skews more positive,” the brokerage said.

It set a new price target of 3,100 pence, down from 3,600 pence earlier. It implies about 16% upside.

Barclays analysts highlighted Croda’s £100 million cost-savings programme as underappreciated by the market. If successful, it could become “a key driver of share performance,” it said.

Barclays also examined the company’s lipid business, which missed a roughly £1 billion COVID-era opportunity due to the lack of key intellectual property, leading Pfizer to work with another partner.

The brokerage described the lipid market as likely oversupplied and said the unit could be a target for activist action or value realisation.

For FY2025, Barclays expects adjusted EBIT of £293 million and adjusted PBT of £267 million, broadly in line with consensus but slightly lower than prior forecasts due to continued headwinds in Croda’s Life Sciences unit from U.S. pharma customers.

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