BNP Paribas raised its rating on Novonesis and the company's American depositary receipts to Neutral from Underperform on Friday, attributing the change to a meaningful pullback in the stock's valuation after the company underperformed the wider ingredients sector earlier this year.
The bank highlighted that Novonesis has lagged the sector by roughly 20% year-to-date even though the company has delivered "solid operational performance," according to the research note. That lag has coincided with a drop in the stock's multiple to 24 times projected 2027 earnings, the analysts said. This multiple represents a 20% premium to specialty-ingredients peers, down from a 40% premium at the end of 2025.
Despite the upgrade, BNP Paribas retained reservations about the sustainability of Novonesis' long-term organic growth. The analysts said their concerns persist, but they also pointed out that 2026 estimates are broadly in line with consensus expectations. Coupled with the possibility of a guidance upgrade when the company reports second-quarter results, BNP Paribas sees potential for the shares to close some of the performance gap with peers.
Novonesis shares closed at 425.8 Danish kroner on July 2. BNP Paribas' target price on the stock stands at 415 kroner, a level that implies about a 3% downside from that close.
More broadly, BNP Paribas described the ingredients sector as having staged a recovery over the quarter, driven by improving sentiment on volumes, easing oil prices and market positioning. The report cautioned, however, that the bar for companies to impress with second-quarter results has risen. Firms that can demonstrate resilient volumes and show that input-cost inflation into the second half of the year is under control remain positioned to outperform their peers, the analysts said.
Valuation across the ingredients sector, the note added, sits at approximately 19 times forward earnings. That is about a 10% discount to the sector's long-term historical average and roughly 40% below the peak valuation levels recorded previously.
In its sector coverage, BNP Paribas named Kerry, Sensient and Symrise as its top picks, assigning an Outperform rating to each. The bank described Kerry's recent underperformance as seeming unfair and said it expects second-quarter data to reassure the market on volumes with a "small upside" to 2026 consensus margin assumptions. For Sensient, BNP Paribas anticipates continued momentum in the second quarter despite uneven progress on its colors conversion, and sees scope for raising full-year guidance. For Symrise, the analysts said sequential organic momentum should help validate both 2026 targets and longer-term ambitions.
On the cost side, BNP Paribas noted that moderating oil prices reduce near-term pressure, but the broker still expects higher input costs in the second half of the year. These cost increases are described as manageable given companies' pricing power and are considered modest relative to the spike observed in 2022. The report also observed that natural raw-material inflation has been relatively benign through 2026.
Looking further ahead, the analysts identified higher fertilizer costs and a greater probability of El Nino-related weather disruption as items to monitor for 2027. They qualified those as watch points that should remain manageable through longer-term procurement strategies and pricing actions.
Summary
BNP Paribas upgraded Novonesis to Neutral after the market reduced the stock's valuation following a period of underperformance versus the ingredients sector. While the broker retains doubts about sustainable organic growth beyond the near term, alignment of 2026 estimates with consensus and the chance of a guidance uptick at Q2 results provide potential for the shares to rebound.