Intertek Group PLC's (LSE:ITRK) potential plan to split the business into two could unlock a higher valuation for its core testing and inspection businesses, according to Panmure Liberum.
The FTSE 100 group launched a strategic review on Tuesday to evaluate a potential split of its Energy & Infrastructure division from its Testing & Assurance arm. The former would be spun off either through a sale or a demerger.
Reiterating its 'buy' rating and 5,450p target price, the broker said the separation of the group’s energy and infrastructure arm from its testing and assurance divisions would improve focus on its higher-margin activities.
Intertek reported first-quarter constant currency like-for-like revenue growth of 5.4%, with consumer products up 10.8% and corporate assurance rising 5.9%. Both divisions are already running ahead of full-year expectations.
Panmure noted that growth in these higher-margin areas, alongside continued margin progression and strong cash generation, underpins the investment case.
The energy division delivered stable trading, which the broker described as encouraging, given disruption in oil and gas markets linked to the Iran conflict.
Panmure said the shares trade on around 14.2 times earnings for the 2026 calendar year, a discount to peers.
"A de-merger may be earnings dilutive, as overheads are increased, but we would expect the consumer products and corporate assurance businesses to trade on a much higher rating."