Croda: Cyclical Headwinds Receding, ~23x Trough EPS
Company Update (CRDA LN) (Buy): Operational leverage means EBIT should jump when revenue growth recovers; this has already begun.
Highlights
Revenue fell by 3.9% for 2024 but growth re-accelerated each quarter.
Adjusted EBIT was 6.3% higher in H2 than in H1, and margin rose 110 bps.
Low plant utilization impacted EBIT in 2024 but has been improving.
2025 outlook has a wide range but implies 13.5% PBT growth at top end.
At 3,300p, we see a 71% total return (15.6% IRR) by 2028 year-end. Buy.
Introduction
We review our Buy rating on Croda after the release of full-year 2024 results yesterday (February 25). Croda shares finished yesterday flat but are up 3% at 3,300 at the time of writing at 4 p.m. U.K. time:
Croda Share Price (Last 1 Year)
Source: Google Finance (25-Feb-25).
We added Croda to our “Select 15” model portfolio as a small position last month, and it currently shows a loss of 1.6%. We have also held Croda since December in real life. We first published our research on Croda online in 2019.
Yesterday’s results show Croda continues to recover from cyclical headwinds. While macro risks remain, the magnitude of a full recovery, potential new product breakthroughs and a reasonable current valuation make the stock attractive.
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