Rentokil: Robust First-Quarter Sales Growth Points to Ongoing Profit Margin Resilience in 2023

Rentokil Initial delivered a healthy set of first-quarter 2023 trading updates that align with our near-term expectations of continued profit margin resilience—in the face of inflationary pressures that remain elevated—and of relative insensitivity in demand for pest control and hygiene services to a more challenged economic outlook in 2023. While slightly stronger-than-expected pest control sales lead us to nudge up our full-year 2023 EBIT estimate by a modest 1% to GBP 934 million, our long-term expectations for the wide-moat stock remain unchanged as does our GBX 580/USD 37 fair value estimate. Rentokil shares screen as approximately fairly valued, trading at a slim premium to our fair value estimate.