Pressures Remain, but SGS Is Powering Through

Organic revenue growth came in close to 6% for narrow-moat SGS for full-year 2022, a solid performance in the face of Chinese coronavirus lockdowns early last year, and a slowing global economy. Operating income, which management had guided to being flat year over year, came in slightly below 2021 levels. Although some of this can be attributed to the aforementioned Chinese lockdowns, it is clear that elevated levels of inflation are having some negative impact on profitability. However, the outlook for 2023 remains robust, and we do not expect to make any material changes to our forecasts on the back of this update. We reiterate our CHF 2,380 fair value estimate and believe the shares are fairly valued at current levels.