JPMorgan downgrades Intertek to 'neutral' from 'overweight'
By Michele Maatouk
Date: Thursday 30 Jun 2022
(Sharecast News) - JPMorgan Cazenove downgraded Intertek on Thursday to 'neutral' from 'overweight' as it took a look at the testing, inspection and certification sector.
The bank said it has been overweight the stock given its attractive margins and return on capital employed, as it has the most post-Covid-catch-up potential and the highest exposure to Oil & Gas tailwinds, especially in North America.
"We retain circa 20% upside to our target price, but we move to neutral given that, like for SGS and Bureau Veritas, the company will face more demanding H2 consensus expectations," it said.
JPM cut its price target on Intertek to 5,300p from 6,000p.
The bank said SGS is interesting for long-term investors given the balanced portfolio and buyback support, but it retained its 'neutral' rating on the shares. It kept its 'underweight' on Bureau Veritas.
On the sector more generally, JPM said: "We make cuts to H1 reflecting the Shanghai lockdowns as well as some FY margin cuts. For now we assume that lost profits are mostly recouped in H2, and we expect that consensus will likely be at least as optimistic."
At 1025 BST, Intertek shares were down 4.6% at 4,150p.
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