Transferring Coverage of Givaudan and Symrise, With the Latter Our Preferred Pick

We are lifting our fair value estimates for Givaudan GIVN by 4% to CHF 2,900 per share and for Symrise SY1 by 10% to EUR 108 per share following a transfer of coverage. We maintain our wide economic moat rating for both companies, supported by switching costs and intangible assets. Symrise is our preferred pick of the two, as we believe the current market price does not fully reflect its peer-leading growth potential, offering upside of around 10% from current levels.

Givaudan and Symrise are some of the largest players in the concentrated flavour and fragrance industry. Although the core F&F market is estimated to grow around 3% annually, leading companies like Givaudan and Symrise are able to consistently outperform the market for a few reasons. First, they are able to take market share from smaller players as the increasing complexities of meeting regulatory requirements and procuring natural raw materials put small companies at a disadvantage. Second, they are deploying their capital into faster-growing adjacent segments like cosmetic ingredients and petcare. Symrise is a prime example of the latter, having made an astute move into the pet food and health market, which now represents around 20% of group revenue and delivers high-single-digit revenue growth and superior margins.

Beyond this, we think the market is becoming increasingly consolidated as the leading F&F companies acquire smaller players or join forces with broader ingredients companies (such as Firmenich’s merger with DSM and International Flavors & Fragrance’s merger with DuPont). This makes it even harder for smaller players to win business (especially from global multinational customers) when going against the leading players.