BVI: Minor model update

Research evidence excerpt

BVI: Minor model update

Bureau Veritas

Target/Upside/Downside Scenarios Investment summary

Longer-term industry outlook solid: The TIC industry's growthBureau Veritas

is supported by some interesting megatrends – the demand

36 125 Weeks 06FEB24 - 26JUN26 for a wide array of solutions to make products and processes

34 safer, cleaner and less environmentally impactful, combined

30 with a digitalising economy, rising wealth in EMs, and

28 heightened regulation and enforcement should support a

26 CURRENTCURRENT 26.1226.12

TARGETTARGET 26.0026.00 24 degree of resilience in BVI's medium term organic growth

22 rates.

16 Retain some fundamental reservations: As highlighted by

15m the recent issues in BVI's Government Services division, the

10m

5m corollary of the TIC sector's huge breadth is that, in more years

2024 2025 2026

F M A M J J A S O N D J F M A M J J A S O N D J F M A M J than not, there is always a fly in the ointment somewhere

BVI FP Rel. MSCI EUROPEAN INDEX MA 40 weeks —a key reason why we characterise the TIC industry as

Source: Bloomberg and RBC Capital Markets estimates for Target 'good' rather than 'great', in contrast to many observers.

Valuation Industry earnings are often weighed down by chronic EM-

We use a multi-stage DCF valuation which, after 5 years of related FX headwinds and we believe that high headline OSG

explicit estimates, assumes an 8.5% WACC; 4.5% medium in many EMs is correspondingly just a mirage in real terms.

term revenue growth; 2.5% terminal growth; 16.4% terminal Restructuring of portfolios is also par for the course across the

margins. Future M&A accounts for ~10% of our PT. The industry, which has a habit of weighing on FCF, though BVI

resulting €26.0 price target supports a Sector Perform rating.