Sharecast - "We think a combination of credible medium-term revenue growth and margin expansion targets, relatively conservative FY24 consensus assumptions, plus the potential for Intertek to deploy surplus capital in a disciplined manner sets up Intertek for outperformance versus the wider sector this year," the bank said.
RBC noted that over the medium term, Intertek targets a return to a 17.5% peak margin and beyond which consensus assumes does not happen before FY28, raising the possibility of upside surprise sooner.
"The management team is focused on best-in-class benchmarking, pricing initiatives and any M&A is likely to focus on higher growth, high margin sectors in our view," it said. "So although the margin ambition is not strictly organic, it highlights Intertek’s desire to keep driving EBITA growth ahead of revenue growth."
In the shorter term, RBC sees the annualisation benefits of the 2022/23 cost reduction plan and the easing of comps in the higher margin consumer products activities underpinning the consensus assumption for around 30 basis points of group margin expansion.
At 1120 GMT the shares were up 0.9% at 4,235p.