A Mixed Period for SGS As the Impact of the War in Ukraine Bites

Narrow-moat testing giant SGS this morning released a mixed trading update for the first 10 months of the year, ahead of its investor day programme later this week. Organic revenue growth has accelerated over 2022, rising to almost 7% between July and October, bucking the trend of economic slowdown, which we are already seeing across many industrial sectors. That said, management have guided to roughly flat operating income year over year, a slight disappointment given that we had anticipated a moderate improvement from 2021 levels. While we may tweak our forecasts on the back of this update, we do not expect this to have a material impact on our CHF 2,230 fair value estimate. Currently, we view the shares as fairly valued.