SGS' Capital Markets Day Confirms the Company Is on the Right Track

Narrow Moat SGS kicked off its capital markets day with a positive trading update showing organic revenue growth of 10% from January to April of this year. This compares favourably with peers Intertek and Bureau Veritas which reported numbers recently, timing differences aside. In terms of revenue, we are back to 2019 levels on an organic basis, but encouragingly, profitability has increased, partly reflective of the flexible TIC model, with SGS shedding more than 5,000 employees over the course of 2020. We do not expect to make any material changes to our numbers on the back of this update and reiterate our CHF 2,100 fair value estimate. With the shares having rallied hard, particularly over the last two weeks, we now view them as overvalued.