Good First Half for Croda on Strong Cost Recovery; Shares Overvalued

Narrow-moat Croda's first-half EBIT was GBP 300 million, up 24% versus 2021. Notably, the EBIT margin increased 70 basis points as cost inflation was fully recovered through price increases. The company expects growth in the second half to moderate in consumer markets along with lower sales in lipid systems due to reduced COVID-19 vaccine demand. Nevertheless, Croda expects full-year EBIT to be modestly ahead of the current consensus, which was GBP 482 million, according to company compiled figures. We don’t expect to make a material change to our GBX 5,150 fair value estimate. At current levels, the shares look overvalued.