JPM backs Bureau Veritas on growth recovery and M&A potential

Investing.com -- J.P. Morgan upgraded Bureau Veritas to “overweight” from “neutral” and raised its December 2027 price target to €34 from €28, citing faster organic growth and increased merger and acquisition activity.

The inspection and certification company’s shares closed at €26.57 on Sept. 28, according to the brokerage note dated Sept. 29.

J.P. Morgan expects organic revenue growth of 6.8% in 2027 and 6.6% in 2028, above Bloomberg consensus estimates of 5.9% and 5.8%, respectively.

The bank said growth should accelerate as Bureau Veritas benefits from stronger demand in its buildings and infrastructure business, particularly from data-centre services, while the agri-food and commodities division should improve following the disposal of its oil and petrochemicals and coal-testing businesses.

Data-centre services are expected to contribute about 1 percentage point to organic growth in 2027, J.P. Morgan said. Bureau Veritas’ data-centre code compliance business grew about 30% in 2025 and the first quarter of 2026, accelerating to 40% in the second quarter.

J.P. Morgan said 2026 should mark a trough in the company’s growth cycle, after project delays and disruption linked to the Middle East conflict. It forecasts organic growth of 6.8% in the third quarter and 7.7% in the fourth quarter, excluding planned disposals, compared with 5.5% in the second quarter.

The bank left its 2026 estimates broadly unchanged but raised its 2027 revenue and earnings-per-share forecasts by 2% and 1.7%, respectively.

Bureau Veritas is trading at about 17 times estimated 2026 earnings, below its 10-year median of about 23 times and at a wider-than-usual discount to peer SGS, J.P. Morgan said.

The brokerage also pointed to scope for increased M&A after last week’s capital markets day, where management raised its target leverage range to 1.5-2.0 times net debt to EBITDA. J.P. Morgan estimates Bureau Veritas could have more than €1 billion of excess cash available for acquisitions in 2027 within that framework.

The company aims to increase its mission-critical asset business to €800 million by 2030 from more than €300 million pro forma for the LotusWorks acquisition, with most of the growth expected organically, according to the note.

J.P. Morgan’s price target increase reflects its higher estimates and an increase in its terminal growth assumption to 2.5% from its discounted cash-flow model, which uses an 8% weighted average cost of capital.

Key risks include weaker project activity from higher interest rates or further geopolitical tensions, slower growth in the Middle East, particularly oil and gas spending, and adverse currency movements from a stronger euro.

Original Article

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