Intertek Group Plc (LSE:ITRK) has been upgraded to outperform by Credit Suisse after the broker did a review of the testing, inspection and certification (TIC) companies.
Credit Suisse (CS) expects Intertek to generate the strongest organic growth in 2022 among the TIC companies after it posted the slowest growth in 2020 and 2021.
The key to the turnaround is the performance of its Trade and Resources divisions, which are recovering, and its enlarged assurance operations, which account for just over fifth of total revenues.
CS is forecasting 2.4% incremental top-line growth over the next two years.
“In addition to leading organic growth, we expect Intertek to drive the strongest margin improvement over the next two years. We forecast 140bp [1.4 percentage points] improvement versus 70bp on average from [sector peers] SGS and BV. The stronger margin accretion is a combination of underlying operational recovery (+95bp), particularly trade, mix shift (+14bp) and M&A (+31bp) as well as scaling of new tech led operations such as Inlight, Alchemy and Protek,” CS said.
Intertek’s shares have drifted lower over the last 15 months from around 6,440p to 5,400p. CS has set a price target of 5,850p.