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Highlights

  • Berenberg reduces target price from 6,000p to 5,700p; maintains 'buy' rating.
  • Q1 organic growth slowed, impacted by lower global fuel trade volumes.
  • FY25 growth forecast trimmed, but over 5% organic growth expected in 2024.

Berenberg has revised its target price for Intertek Group Plc (LSE: ITRK) downward from 6,000p to 5,700p, while maintaining its ‘buy’ rating. The adjustment follows a trading update in which Intertek reported slower-than-anticipated organic growth in the first quarter of 2024. The underperformance was largely attributed to the company's Caleb Brett division, which is highly exposed to global fuel trading, particularly crude oil.

Despite the weak start to the year, Berenberg views the slowdown as transitory, citing industry expectations for a rebound in crude oil volumes through the remainder of the year. This could alleviate pressure on the company’s fuel testing segment in upcoming quarters.

Intertek's Industry and Infrastructure markets are forecast to experience improved momentum in the near term, aided by ongoing recovery in the building and construction sector. Meanwhile, consumer product testing has remained steady, showing no signs of contraction.

However, analysts caution that Intertek is the most cyclical among its testing and certification peers due to its heavier reliance on global trade flows. Analyst Carl Raynsford noted that while the firm has reduced its FY25 growth projections, over 5% organic revenue growth is still attainable for FY24, albeit with foreign exchange pressures acting as a headwind.

As of the latest trading update, Intertek’s share price was down 0.9% at 4,744p, reflecting investor caution following the Q1 results and the revised forecast.

The company's performance in the coming quarters will hinge on recovery in trade volumes and the strength of its more stable business segments.