Schindler Group target price cut to CHF 273, Hold maintained

Overview

This report is Deutsche Bank's forecast revision report on Schindler Group. It focuses on second-quarter operating performance, price/cost pass-through, earnings forecasts for 2026 to 2028, and DCF valuation. The core conclusion is that the company's orders and revenue performance remains resilient, with modernization and maintenance businesses providing support, but declining new installations, a negative revenue mix in the second half, and higher raw material cost pressure have led to a slight downward revision in margin expansion expectations. Therefore, the Hold rating is maintained and the target price is adjusted to CHF 273.

Core views

Schindler Group's second-quarter order growth was similar to the first quarter, at about 3% in local currency, showing that project selectivity is gradually being reflected in revenue and orders. New installation order value grew at a high single-digit rate and units grew at a low double-digit rate, mainly driven by Asia-Pacific excluding China, but China's new installations business continued to decline and underperformed peers. Modernization orders rose 11% year over year, with growth across all regions including China. Management expects a more negative revenue mix in the second half, and the first-half margin benefit from delays in some new installation projects should not be simply extrapolated; at the same time, raw materials such as copper and aluminum are creating stronger cost pressure. The company will mitigate this through price increases and surcharges, but long-cycle orders create a timing gap in how this is reflected in the income statement.

Analysis framework

The report combines a second-quarter operating breakdown, management updates on price/cost dynamics, comparisons between Deutsche Bank's model forecasts and market consensus, and uses DCF valuation to determine the target price. Earnings forecasts focus on tracking orders, revenue, adjusted EBIT, margins, cash flow, and valuation multiples.

Methodology notes

• Valuation methodsDCF

  discounted cash flow valuation

  Deutsche Bank uses explicit forecasts through 2030 and a terminal value calculation to conduct a DCF valuation for Schindler Group. Key assumptions include a 7.8% WACC calculated under the CAPM framework and a perpetual cash flow growth rate of 3.5%.

• Cost of capitalCAPM

  capital asset pricing model

  The report uses the CAPM framework to estimate WACC, an important input for the DCF discount rate.

• Operating analysisPrice/cost pass-through analysis

  timing gap between price increases, surcharges, and raw material cost pressure

  The report emphasizes that the company can offset energy and raw material costs through price increases and surcharges, but long-cycle businesses such as new installations create a timing mismatch between rising costs and improvement in the income statement.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Schindler Group equity (SCHN.S)

  Primary asset covered by the report

  Strengths

  Modernization order growth is strong, and the maintenance business is expected to maintain low- to mid-single-digit growth; EMEA new installations and modernization gained market share, and the order backlog grew about 6% in local currency.

  Weaknesses

  China's new installations business continues to decline, the project mix is unfavorable for second-half revenue and margins, and cost inflation pressure is increasing.

  Comparison

  Deutsche Bank expects 2026 orders, revenue, and adjusted EBIT to be broadly in line with consensus; for 2027, revenue is about 1% below consensus, while orders and adjusted EBIT are broadly in line.

  Risks

  Exposure to cyclical construction markets, operational improvements falling short of expectations, lagged pass-through of rising raw material prices, and a slower-than-expected recovery in key construction markets.

Key data

• RatingHoldA neutral view is maintained; no buy or sell recommendation over a 12-month horizon.
• Target priceCHF 273.00Previously CHF 290.00, lowered this time.
• Current priceCHF 241.00As of 2026-07-22.
• 2026E revenueCHF 11.0bnDeutsche Bank expects about 3% year-over-year growth in local currency.
• 2026E adjusted EBITCHF 1.5bnEquivalent to an adjusted EBIT margin of about 13.8%.
• 2027E revenueCHF 11.4bnExpected to grow about 4% year over year in local currency.
• 2027E adjusted EBITCHF 1.6bnEquivalent to an adjusted EBIT margin of about 14.3%.
• WACC7.8%DCF valuation assumption.
• Perpetual cash flow growth rate3.5%DCF terminal value calculation assumption.
• Full-year cost inflation impactabout CHF 35mAbout one-third reflected in the first half and two-thirds in the second half.
• Tariff impactabout CHF 15mManagement guidance is unchanged; IEEPA refunds have started to be processed, but the amounts appear small.

Impact & implications

The report's view on investment implications is neutral. The target price remains above the current price, but the Hold rating is maintained, indicating that the analyst believes potential upside is offset by cost inflation, worsening business mix, and cyclical construction market risks. If modernization and maintenance continue to grow and price pass-through is faster than expected, margins could outperform the model; if China's new installations business continues to deteriorate or raw material costs cannot be passed through, then earnings recovery may fall short of expectations.

Risks

• A weaker cyclical construction market could pressure new installation orders and revenue.
• Higher raw material costs, especially for copper and aluminum, could erode margins.
• There is a timing gap in the pass-through of price increases and surcharges to the income statement, especially for long-cycle new installation projects.
• China's new installations business continues to decline and the company is underperforming peers.
• If operational improvements fall short of expectations, adjusted EBIT margin expansion may be lower than forecast.
• Exchange rate fluctuations may affect revenue and earnings reported in CHF.

What to watch

• Whether the second-half revenue mix weakens as management expects.
• The actual realization pace of roughly CHF 35m in raw material cost inflation.
• Whether price increases and surcharges can cover copper, aluminum, and energy cost pressures.
• Whether modernization orders can maintain double-digit growth.
• Whether weakness in China's new installation market continues to drag on group orders.
• Whether the 2026 adjusted EBIT margin can reach about 13.8%.
• Whether the market continues to accept the 7.8% WACC and 3.5% perpetual growth assumptions in the DCF after the target price cut.