Bureau Veritas: Strong Start to the Year

Narrow-moat Bureau Veritas BVI started 2023 in fine fashion, posting organic revenue growth of 8.5%, illustrating the resilience and stability of the testing, inspection and certification sector as a whole. With management confirming the outlook for the full year, we do not expect to make any material changes to our forecasts on the back of this update. We reiterate our EUR 28 fair value estimate and despite recent rallies, we see modest upside from the prevailing share price.

Growth was mostly broad-based. Areas like certification and marine and offshore grew by double digits, but the one area of concern was consumer, which actually declined by 3.5%. Contributing just 11% of group revenue, this was easily compensated for by growth in other areas. However, the trend is concerning with management citing the global economic slowdown and reduction in consumer demand for softline products (clothing and so on). This bodes poorly for peer Intertek, which has outsize exposure to this segment.

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