Investing.com -- Citi Research in a note dated Monday has upgraded Symrise AG (ETR:SY1G) to a “buy” rating, pointing to its historically low valuation and resilient business model amid a challenging global backdrop.
The upgrade follows a broader review of the European chemicals sector, where Citi sees value in adding defensive exposure.
Symrise is trading near its lowest EV/EBITDA multiple in a decade. Despite recent challenges, including profit warnings and softness in segments like pet nutrition, Citi finds no fundamental impairment to the company’s model.
The current valuation also reflects a significant discount to peer Givaudan, with the gap now around 40 percent above the long-term average.
The company’s limited exposure to discretionary categories such as fine fragrances (approximately 6% of sales) and cosmetic ingredients (around 8%) positions it well in an environment of consumer caution.
In contrast, more stable segments like pet nutrition, which make up roughly 18% of sales, are expected to hold up as consumers continue to prioritize spending in that area.
Symrise also stands out for its deep backward integration into raw materials, covering about one-third of its needs through internal processing and direct sourcing from local producers.
This integrated model helps buffer the company from raw material price volatility and trade disruptions. Citi sees this as a competitive advantage, particularly if tariffs lead to cost inflation across the sector.
Citi raised its target price on the stock to €120 from €110 per share. The revision reflects not only the company’s fundamentals but also expectations of lower corporate tax rates in Germany.
The updated valuation implies a 16x EV/EBITDA and 28x adjusted P/E for 2025, excluding purchase price amortization. Citi forecasts organic growth of 5.1% for the year and expects the EBITDA margin to remain at approximately 21%.
Despite current uncertainties, including potential tariff-related cost increases, Citi expects Symrise to maintain positive volume growth and resilient profitability.
The prospect of lower interest rates, particularly in Europe, may also support valuation, with Citi’s analysis suggesting that rate cuts could more than offset the impact of modest earnings reductions.