Broker snap: Goldman Sachs says 'buy' Croda

2nd Nov 2012 11:46

Goldman Sachs has reiterated a 'buy' recommendation on Croda International, reducing its price target to 3150p from 3340p. This still provides over 45% upside on its current price of approximately 2160p.Following slightly disappointing third quarter results from the specialty chemicals company, Goldman analysts have lowered their earnings per share (EPS) forecasts for 2012-14 by 4% with nearly half of the reduction being a result of foreign exchange movements. However, they believe "Croda is exposed to some of the strongeststructural growth themes (e.g consumer care) within the sector".As a consequence they state: "We would view any weakness as an opportunity to buy a 2020 Vision Leader at a depressed valuation. Croda trades at 8.6 times 2014 estimates of EV/EBITDA [enterprise value/earnings before interest, tax, depreciation and amortisation] verses a historical average of 9.5 times, despite stronger returns relative to history."Goldman Sachs' twelve-month price target moves to 3150p (from 3340p) and is based on 11.5 times 2014 estimates of EV/EBITDA.CM