DAVY VIEW

DSM’s transformation to a growth-led organisation has impressed. From 2015 to 2019, it grew EBITDA by close to 60%, driven by sustained organic revenue growth and margin expansion (+480bps). Actions by its senior management team have placed it on a fundamentally better pathway. Across the Ingredients sector, above market revenue growth defines the winners (Symrise, Kerry, Givaudan) – in the case of DSM, its organic growth run-rate has slowed materially. As such, sustaining above market revenue growth will be a challenge over the near term. Fundamentally, we like the business – but it must evolve. Interestingly, its new Fit-for-Growth initiative is a nod in that direction. Absent large-scale M&A or divestments, we believe the stock is up with events (P/E 22.5x FY2). After five years, we downgrade our rating to ‘Neutral’.