Intertek best-placed for ESG testing, JP Morgan says

JP Morgan said Intertek was its preferred name among testing, inspection and certification (TIC) companies as the broker said the sector was positioned for growth.

Analyst Sylvia Barker said she was getting ever more questions about how TIC companies compared on exposure to environmental, social and governance (ESG) measures and the scale of the revenue opportunity. Companies are increasingly under pressure from investors and campaigners to demonstrate their credentials on ESG.

Intertek and SGS are in a good position in food and life sciences testing, which are large and structurally attractive markets, Barker said. Intertek's Alchemy asset also has unique exposure to training, she said, sticking by her 'overweight' rating and £65 price target for the FTSE 100 group.

Intertek shares rose 3.5% to £57.22 at 09:57 GMT.

Bureau Veritas BV) and Applus have more exposure to inspections of factories and building sites, Barker said. BV also seems to be strongest in sustainability reporting and audits though Intertek and SGS are in a good spot too, the analyst added.

Barker said the sector was "well positioned for ESG-driven growth but with low transparency" and that she would like more information to rank the companies.

"Given we see positive earnings momentum for TIC in 2021 and BV’s strong margins in H2, we upgrade BV to 'overweight'," Barker wrote in a note to clients. "Our preferred TIC names are Intertek first, followed by Bureau Veritas."

Bureau Veritas shares rose 1.3% to €24.18. Applus dipped 0.3% to €8.62 and SGS fell 1.7% to 27.09 Swiss francs.