Bureau Veritas Earnings: Strong Momentum Continues

Narrow-moat tester Bureau Veritas’ BVI strong performance continued into second-quarter 2023, with organic revenue growth actually accelerating above 10%. Management upgraded the full-year outlook for the firm in a show of confidence amid its current performance. While we might tweak our near-term forecasts on the back of this update, we reiterate our EUR 30 fair value estimate. We see decent upside potential from the prevailing share price.

Structural trends appear to have driven much of the growth in the first half of the year. Segments such as marine and offshore and buildings and infrastructure were beneficiaries of the shift to decarbonisation and energy transition, while the certification business saw strong demand for environmental, social, and governance-driven services. The consumer products segment was the weak link, with revenue declining by 3% organically as global demand remains subdued; retailers are also operating with lower inventory levels and launching fewer new products.

The trend toward ESG-related services is something we have been highlighting for some time now. The company now classifies more than half its revenue from sustainability-related activities. This includes certification of sustainable supply chains, construction projects that incorporate sustainability goals, to the inspection of electric vehicle charging stations. This relatively high degree of exposure should support top-line growth above the gross domestic product level in future.