Croda's 2022 Results Show Solid Growth; Shares Overvalued

Narrow-moat Croda reported 2022 EBIT of GBP 515 million, up 10% versus 2021, but broadly in line with company-compiled consensus and our forecast. In 2023, the company expects sales growth in consumer care and life sciences to be supported by demand for cropcare and noncoronavirus-related pharmaceutical products. However, management expects performance to be second-half-weighted due to the divestment of performance technologies and industrial chemicals. Despite lower volumes for COVID-19-related products, lipid system sales expectations for 2023 remain unchanged at $120 million, with growth returning in 2025 as clinical opportunities in mRNA and nucleic acids are converted into commercial projects. This seems to align with current company-compiled consensus expectations of a 5%-7% decline in sales and EBIT during 2023. Regardless, we don’t expect to make a material change to our forecast or GBX 5,400 fair value estimate. Consequently, shares continue to look overvalued.