SGS (1K) | Buy (Not Rated) | Quality re-rating ahead

Research evidence excerpt

SGS (1K) | Buy (Not Rated) | Quality re-rating ahead

SGS Buy | Target Price: CHF102.00

Shift towards North America

The acquisition of ATS in 2025 materially shifts SGS's geographic exposure towards North

America, a region currently benefiting from industrial reshoring, infrastructure upgrades, and

large-scale investment in energy transition and data infrastructure. While this brings SGS closer

to Bureau Veritas in terms of its US exposure, it remains less North America-weighted than

Eurofins and Intertek, both of which generate over a third of their revenues in the United States.

This deal also strengthens SGS's leverage to multi-year structural drivers, which are unlikely to

fade in the near term.

Chart 1: SGS 2025A sales breakdown Chart 2: SGS 2025 pro forma sales breakdown including ATS

LATAM

10%

EEMEA Europe

11% 33%

NAM

12%

Asia Pacific

34%

Source: Kepler Cheuvreux Source: Kepler Cheuvreux

The transaction is, however, a meaningful one in terms of size – ATS was acquired for an enterprise

value of USD1,325m, while its sales were approximately USD460m – and will weigh on near-term

margins. ATS's EBITDA margin of approximately 21% compares to 22.6% for the SGS group,

creating a dilutive effect upon consolidation. Management targets approximately 30% in

incremental EBITDA within three years through synergies, which, if delivered, would more than

offset the initial dilution. The consolidation took effect in January 2026 and will depress ROIC in

the short term. The associated goodwill has not yet been disclosed, preventing a full assessment

of the returns on invested capital at this stage.

During the Q1 sales call, management provided an update on ATS and said it was performing in

line with expectations and should be accretive to organic growth in 2027. The integration