DSM-Firmenich: The diversified ingredient powerhouse benefiting from a transformational deal

An asset sale, a strengthening business, megatrends in the consumer and ingredient space and a compelling valuation

Welcome to the 21th investment case and 18th resilience idea on Crack the Market (and the most comprehensive DSM-Firmenich investment case you will find online)! Join me as I dissect an ingredient giant, which is coming out of a recent transformational merger stronger than ever, with a better portfolio and an upcoming asset sale that could lead to a re rating, at the same time as fundamentals are inflecting.

Though not necessary, I highly recommend reading/listening to the Ingredients deep dive I cowrote with DualEdge Invest before reading this analysis, to have a better understand of what is the ingredient sector and what makes it so attractive to investors.

Ingredients: Reformulating the world - a resilient and high quality growth sector at an inflection point

Twice a week, I will release deep dives into stocks and sectors that fit into the three themes that I see winning in this age of tariffs and deglobalization: resilience, sovereignty & reshoring, China. I will then deep dive into the opportunities in the AI data center value chain.

Take advantage of this once in a generation opportunity to build long term wealth by investing in great stocks that will deliver returns for your portfolio for years to come.

You can already read my first 19 deep dives, all of which I see as winners in this new world of tariffs and deglobalization:

• ASML (reshoring & China idea): The most innovative company in the world will 2.5x its EPS by 2030.

• LKQ (resilience idea): The most defensive business in the auto industry is a tariff winner and could become a compounder.

• Atlas Copco (resilience, reshoring & China idea): The best industrials business in the world is on sale, extremely resilient and will benefit from US reshoring.

• Badger Meter (resilience idea): The perfect business in the perfect end market, water meters are the definition of resilience.

• Knorr Bremse (resilience idea): Who knew making brakes was this lucrative? Rerating with self help story and upside from German infra plan.

• Flex (reshoring idea): The electronics manufacturing giant building Nvidia’s servers and enabling reshoring is becoming a better business.

• Itron (resilience & reshoring idea): Riding the grid investment super cycle and enabling smart grids.

• Roper (resilience idea): A resilient cashflow compounder in the software space with inflecting growth.

• RELX (resilience idea): The company to own forever – one of the very best businesses on Earth.

• CPKC (resilience & reshoring idea): The rail connecting Canada/US/Mexico and benefiting from reshoring.

• Novo Nordisk (resilience idea): The most exciting pharma company in the world is misunderstood and its growth engine is ready to roar back to life.

• Kurita (resilience, reshoring & China idea): Water services expert with improving margins and benefiting from reshoring of semiconductor production.

• Halma (resilience idea): High quality compounder in safety, health and environmental technologies.

• Quanta Services (resilience & reshoring idea): Countercyclical compounder riding a multi decade infrastructure buildout.

• Infineon (China idea): Power semiconductor leader with strong structural drivers (AI power and China auto) amidst a cyclical recovery.

• Hubbell (resilience & reshoring idea): Pure play on US electrification demand driven by AI and grid investment cycle.

• Iberdrola (resilience & reshoring idea): Best integrated utility in the world with a stellar track record and solid growth driven by networks and renewables

• Nvidia (AI & data center idea): The backbone of the AI world is unstoppable.

• Veolia (resilience & reshoring idea): Resource management giant (water, waste, energy) due for a rerating.

• TJX (resilience idea): The retail giant that keeps winning.

After reading this article, you will understand why this company is present everywhere in consumer products, what it does, why it is has been volatile in recent years despite a defensive core business, why it is at an inflection point with a clear catalyst (asset sale) on top of a strengthening business (better product portfolio, synergies from its merger and inflecting fundamentals).

In this article I go through:

1. DSM-Firmenich’s history and the recent merger between DSM and Firmenich, creating the 3rd largest ingredient company.

2. How the company is in the midst of a transformation of its business with the sale of its most volatile and lowest margin business creating a focused and high quality ingredient compounder.

3. How the company aims to ride the powerful megatrends of the ingredient sector as well as deliver material synergies over the next few years.

4. How its recently simplified governance structure and experience management team is delivering on its medium term objectives.

DSM-Firmenich Investment Case