Intertek Group PLC (LSE:ITRK)’s solid first-half update was met with a “sell” rating by Shore Capital analysts, which dubbed the shares fully valued despite the “upbeat” report.
“The performance appears in line with our modelled expectations at this juncture, accordingly our forecasts remain unchanged,” analysts at the bank wrote in a note.
“For the second half, we continue to expect the benefit of market recovery to begin to slow against gross domestic product drivers which we hope to see strengthen for 2025.”
FTSE 100-listed product testing firm Intertek reported a 6.1% increase in like-for-like revenue to £1.66 billion for the six months to June on Friday.
Adjusted operating profit climbed 14.2% on a constant currency basis to £265.1 million, as margins grew by 1.1% to 15.9%.
Shore Cap noted the growth in margins was “welcome” but highlighted Intertek’s revenue growth was off sector peers SGS and Bureau Veritas.
Analysts added Intertek’s product testing services were a “necessary and growing element within the global economy, underpinning quality companies’ operations.
“However, growth rates are linked closely to GDP exposure and these services are delivered on a business-to-business basis in a competitive market.
“The margin ceiling is surely determined by visible returns on capital.”
Intertek shares sat flat on Friday following the update.