SGS SA: Feedback: More positive results in H2 vs H1 despite still challenging conditions in Europe
BUY, Fair Value CHF2,400 (+12%)
Management confirmed “solid” top line growth and “improved” operating results for the full year on a constant currency. Nevertheless we have to adjust our forecasts, now anticipating a lfl revenue increase of 5.7% for the whole year vs.7.5% previously and maintaining the adjusted operating margin at 16.9% with an adjusted EBIT of CHF1,026m (vs. CHF1,040m). We are confirming our positive opinion on the stock and our Fair Value of CH2,400 (DCF-defined valuation of CHF2,370). Again, on the TIC sector we prefer Bureau Veritas (H1 results on 28th August) regarding 1) less exposure to the commodities sector (18% of total revenue, o/w less than 8% in Minerals), 2) a more resilient industrial segment (lfl revenue growth of almost 11% in Q1) and 3) a less challenging valuation with EV/EBIT 2013e of 14.9x vs. 16.8x for SGS.
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