Jefferies downgrades Croda, upgrades Givaudan on margin outlook shift

Investing.com -- Jefferies on Tuesday downgraded Croda International Plc (LON:CRDA) to “hold” and upgraded Givaudan (SIX:GIVN) to “buy.” 

Jefferies cut Croda’s price target to £30/share, saying the company’s focus on restoring volumes to improve utilization delays clarity on incremental earnings until the end of 2026. 

The brokerage said competitive pricing pressure in consumer chemicals suggests it is not a favorable time to add volumes into the market, which limits operating leverage. 

Jefferies forecast EBITDA margins rising 60bps per year in FY26 and FY27, compared with consensus expectations of 120bps per year. 

The brokerage said Croda’s recent variability in regional and end-market performance underscores the importance of operating leverage across shared services. 

It also said pricing pressure in lower-end consumer chemicals is unlikely to support margin improvement.

According to Jefferies, converting customers to a more premium product mix may depend on end-market growth and customer attitudes toward innovation, which the firm described as challenging in the current macro environment. 

Jefferies said Croda is entering a period of greater cost and capex discipline as it moves away from peak investment, though restructuring outflows will remain an overhang. 

The brokerage forecast FY adjusted PBT of £261 million, toward the low end of Croda’s guidance range of £255 million-£285 million, and listed the Q4 FY25 update on Feb. 24, 2026 as the next catalyst. 

Croda trades at a 6% EV/EBITDA premium to peers, compared with a 25% three-year average.

Jefferies’ long-term scenarios include a base case of 3000p with an 8% gain, an upside case of 4200p with a 52% gain and a downside case of 1400p reflecting a 49% decline.

For Givaudan, Jefferies raised its price target to CHF3,800/share, saying the company maintains outperformance across cycles. 

The brokerage forecast that Givaudan will grow about 100bps ahead of peers and hold a 550bps margin premium, extending what Jefferies described as a quality premium to peers. 

Analysts said that even if fragrance and taste end-market growth moderates into 2026, Givaudan’s margins are supported by operating leverage from volume outperformance and a more benign raw material environment. 

Jefferies said investments in capex, SG&A and M&A and a less supportive mix from fine fragrance may offset part of this benefit but still expects Givaudan’s operating margins to remain best in class.

Jefferies said Givaudan’s expansion into adjacent markets, including pet food, probiotics and cultures and beauty, represents a low-risk growth option. 

The brokerage said this strategy relies on selective M&A and leverages the company’s existing R&D and technology base and sales force.

According to the report, Givaudan’s organic sales growth targets appear more supported by market share gains from local and regional customers, increased dosage and entry into adjacent markets. 

Jefferies forecast Q4 OSG of 3.8% and EBITDA margins of 24.5%, and noted that the incoming CEO in March 2026, Stammkoetter, will be supported by current CEO Andrier transitioning to the chairman role.

Givaudan trades at a 48% EV/EBITDA premium to peers, compared with a 42% historical average. Relative to multinational customers, it trades at a 28% P/E premium, compared with a 44% historical average. 

Jefferies said the last time it traded at that premium to customers was in 3Q23, when its OSG was 330bps below customers, with the underperformance tied to destocking.

Long-term scenarios include a base case of CHF3800 with a 13% gain, an upside case of CHF4300 with a 28% gain and a downside case of CHF1800 reflecting a 46% decline.