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On Tuesday, Citi revised its price target for Croda International (CRDA:LN) (OTC: COIHY), a global specialty chemicals company, to GBP 45.50 from the previous GBP 50.00, while maintaining a Neutral rating on the stock. The adjustment follows a reassessment of the company's financial year 2024 (FY24) forecasts in light of persistently challenging market conditions.
The bank's analyst noted that the anticipated recovery in demand for Croda's products has not materialized as expected. The initial forecast had included a 17% half-on-half improvement in profit before tax (PBT) for the second half of 2024. This optimistic outlook was based on the assumption that sales volumes would continue to rise, particularly in the Crop and Pharma sectors.
However, current indicators do not show an uptick in the Crop sector, and the destocking trend in consumer health markets seems likely to continue. Consequently, the analyst has reduced the underlying PBT forecast for FY24 by 3% to £268 million, which is 2% below the consensus and near the lower end of Croda's guidance range of £260 million to £300 million. This revision suggests that the higher end of the company's full-year guidance may be scaled back.
For the first half of 2024, the underlying PBT prediction remains largely unchanged at £127 million, aligning with the consensus of £126 million. The decrease in the price target from £50 to £45.50 primarily reflects the lowered earnings estimates.
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