Some Pickup in Growth for Intertek in Third Quarter, but Still Trailing Peers

Investors have thus far been relatively underwhelmed by narrow-moat Intertek’s post-coronavirus performance, with the numbers this year lacking the recovery bounce that peers Bureau Veritas and SGS have been reporting. Its third-quarter update will not do much to alleviate that in our view, with underlying revenue growth up 6.2%, which in reality means revenue for the period still sits below 2019 levels. We believe this is primarily related to idiosyncrasies in Intertek’s end-market exposures, which seem to be recovering more slowly than those of peers, rather than any structural issues at the company. As such, we do not plan on making any changes to our forecasts on the back of this update, and reiterate our GBX 4,420 fair value estimate. Despite the stock selling off from the highs reached this time last year, we believe the shares still sit in overvalued territory.