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Investing.com -- J.P. Morgan downgraded Swiss flavour and fragrance company Givaudan (SIX:GIVN) to “neutral” from “overweight,” citing an expected slowdown in the fine fragrance market and weaker growth in 2026.
The brokerage projected the fine fragrance segment, which has posted a 14% compound annual growth rate since 2021, to slow to around 1% by 2026. Givaudan derives roughly 10% of its sales from fine fragrances.
While the company’s diversified client base and geographic footprint, including exposure to mass fragrances, may mitigate some pressure, it is not expected to be immune to the slowdown.
J.P. Morgan revised its forecast for Givaudan’s organic sales growth to 4.1% in 2026, down from a previous 4.5%. Fine fragrance growth is expected to moderate to approximately 4%.
The brokerage cut projected 2026 earnings per share by 2% and lowered the adjusted EBITDA margin to 24% from 24.2%, placing its estimates slightly below consensus expectations of 4.7% sales growth and a 24.5% margin.
Valuation multiples have eased but remain elevated. Givaudan now trades at a projected 24.5 times earnings and 18.3 times EV/EBITDA for 2026, roughly in line with the company’s long-term average forward P/E of 24.
The stock continues to trade at a 20% premium to the Ingredients sector and a 32% premium to European staples excluding tobacco, close to historical highs. The bank lowered its price target to CHF 4,000 from CHF 4,200.
J.P. Morgan flagged broader challenges in the ingredients and consumer staples markets. Demand has softened across the U.S., Europe, and emerging markets, notably Latin America, while China remains subdued.
Specific categories, including pet food, aroma ingredients, and UV filters, have shown weakness. Branded prestige fragrance players have reported growth deceleration, with second-half 2025 rates falling to low single digits from high single digits earlier in the year.
The analysts noted that while fragrance ingredient manufacturers serve a wider client base, including smaller players and retailers outperforming branded perfumers, these factors are unlikely to fully offset the slowdown in the broader fine fragrance market.
Near-term growth may remain positive, but normalization is expected over the next 12 months, accompanied by potential destocking risks.
J.P. Morgan said Givaudan’s execution and portfolio diversification, including regional, specialty channel, and niche fragrances, may help mitigate the impact.
The slowdown in fine fragrances, however, is expected to negatively impact the company’s earnings and top line growth in 2026.