Berenberg hikes target price on Intertek

Berenberg stated that despite a strong first-quarter update, Intertek's stock price movement was "surprisingly muted" on the day.

"Our belief is that despite bullish looking numbers in consensus, consensus numbers do not match sentiment among much of the buy-side, and (according to our feedback) much of the sell-side," said Berenberg. "We pull forward our estimate of when Intertek will be able to meet its 17.5% mid-term margin guidance to 2026 from 2027, and believe there is upside risk to that estimate."

The German bank adjusted FY24 margin phasing, with accretion occurring in the second half of the year for Intertek. It expects FX headwinds to ease into the second half, and estimate an underlying margin of 16.8% for the year - a 40 basis point improvement on FY23).

"Our working assumption is that the company can generate 50bp of underlying margin improvement on an annual basis, excluding FX, and so we think there is upside risk to our estimates in the longer term."

Berenberg added that Intertek trades on an FY24 price-to-earnings ratio of 20.5x, versus its implied P/E of 22.9x.

Reporting by Iain Gilbert at Sharecast.com