H1 profits beat expectations, but the pace of growth recovery remains highly uncertain
AI summary card
H1 profits beat expectations, but the pace of growth recovery remains highly uncertain
Goldman Sachs maintains its Sell rating and 12-month target price for Lindt & Sprungli, believing that although the company is repairing demand through selective price cuts, promotions, and marketing investment, organic growth in FY26-27 remains weak, with sentiment hinging on when volumes recover.
- Lindt's H1 EPS, excluding the one-off tariff refund, was approximately 9% above Visible Alpha consensus expectations, but the share price fell 2.1% on the day.
- Management did not reiterate its expectation for a recovery to 6-8% organic growth in FY27 and acknowledged that it may reflect lower cocoa prices through pricing actions to support long-term demand.
- Goldman Sachs forecasts a 3.1% organic growth CAGR for FY26-27 and remains cautious on near-term growth, but believes growth could normalize from FY28 on a normalized pricing base.
- Goldman Sachs raised its FY26/27/28 EPS forecasts by 1.7%/0.2%/0.2%, respectively, while maintaining target prices of CHF95,000 for registered shares and CHF9,500 for participation certificates.
Report interpretation
Overview
This report assesses Lindt & Sprungli's growth recovery path following strong H1 profits. Goldman Sachs believes the company is taking more aggressive measures to repair demand, including selective price cuts, price-pack architecture, promotional flexibility, and continued marketing investment; however, management's cautious comments on its FY27 growth target have not alleviated investor concerns over when the medium-term growth algorithm will recover.
Core views
The core view is that better-than-expected profit performance is insufficient to alter the cautious near-term outlook. Goldman Sachs recognizes the necessity of price cuts and promotions to repair volumes, but believes relatively high price elasticity in mature European markets, weaker Christmas orders in parts of Europe, and the likelihood that FY27 pricing will no longer be positive will all weigh on FY26-27 organic growth. If the pricing base normalizes and innovation and marketing continue to advance, growth could normalize in FY28.
Analysis framework
The report combines H1 results, management commentary, price and volume decomposition, regional demand differences, cocoa cost trends, EPS forecast revisions, and DCF and valuation-multiple methods. Valuation assigns equal 50% weights to DCF and P/E multiples, with the 12-month target price unchanged.
Methodology notes
The target price is derived using equal 50% weights for DCF and P/E multiples.
The DCF assumes a 7.7% WACC and a 2.5% perpetual growth rate; the multiple-based method applies a 27x P/E to Q5-Q8 EPS forecasts.
Growth is decomposed into price, volume, and mix factors.
The report emphasizes that Lindt's growth since 2021 has been driven primarily by pricing, with future sentiment hinging on whether volumes can take over after prices decline.
Cocoa prices and consumer elasticity are key variables for the margin and growth path.
Cocoa prices have rebounded from their lows but remain below the late-2024 peak; visibility is low at this stage, making it inappropriate to extrapolate directly to 2028 margins.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Lindt & Sprungli registered shares (LISN.S)The report's covered security; the Sell rating is maintained.
- Strengths
- Strong premium brand positioning, continued marketing investment, relatively better North America and Rest of World orders and growth prospects, and expected leverage below 1.0x.
- Weaknesses
- Recent growth has relied more heavily on pricing, mature European markets have relatively high price elasticity, and FY26-27 organic growth forecasts are low.
- Comparison
- The current 12-month forward consensus P/E carries an approximately 62% premium to GS Staples, below the 10-year historical premium of 87%.
- Risks
- Earlier realization of raw-material deflation, stronger demand elasticity, or a faster-than-expected North American recovery would represent upside risks to the Sell view.
- Lindt & Sprungli participation certificates (LISP.S)The same Lindt & Sprungli security group; the target price is set at one-tenth of the nominal value of the registered share.
- Strengths
- The nominal value of the participation certificate is one-tenth that of the registered share, and the valuation framework is the same as for the company fundamentals.
- Weaknesses
- Participation certificates have no voting rights, and the investment case remains constrained by uncertainty around growth recovery and margins.
- Comparison
- The CHF9,500 target price implies approximately 1.1% upside from the current price of CHF9,400.
- Risks
- It is similarly affected by cocoa prices, price investment, volume recovery, and the intensity of industry promotions.
Key data
- RatingSellThe rating has been maintained since 2025-11-20.
- LISN.S 12-month target priceSFr95,000.00The current price is SFr95,600.00, implying approximately 0.6% downside.
- LISP.S 12-month target priceSFr9,500.00The current price is SFr9,400.00, implying approximately 1.1% upside.
- H1 EPS performanceApproximately 9% above Visible Alpha consensus expectationsExcludes the one-off tariff refund.
- FY26/27 organic growth forecast+3.1% CAGRGoldman Sachs remains cautious on near-term organic growth.
- FY26/27/28 EPS revisions+1.7% / +0.2% / +0.2%Reflects the CHF11.7m H1 26 tariff refund and slightly stronger growth in North America and Rest of World.
- FY26 revenue forecastSFr6,045.4mnAbove the previous SFr6,026.4mn.
- FY27 revenue forecastSFr6,232.9mnAbove the previous SFr6,206.4mn.
- FY28 revenue forecastSFr6,579.1mnAbove the previous SFr6,548.3mn.
- FY26/FY27/FY28 EPS forecastsSFr3,241.43 / SFr3,564.79 / SFr3,864.45Based on the GS Forecast figures shown in the table.
- Cocoa pricesUp approximately 70% over the past 3 months, but approximately 54%-55% below the late-2024 peakThe report believes current price movements are driven more by speculative factors, with visibility into the main crop season expected to improve in September.
Impact & implications
For investors, near-term earnings outperformance has not eliminated uncertainty around the growth recovery. If price cuts and promotions effectively drive volumes, FY28 growth normalization and margin improvement could support valuation; however, if European demand remains weak, cocoa prices push costs higher again, or the 2027 pricing strategy compresses 2028 margins, the scope for share-price re-rating will be limited.
Risks
- Raw-material deflation materializes earlier than expected, potentially improving gross margins and earnings.
- Consumer price elasticity is stronger than expected, allowing volumes to recover faster than Goldman Sachs assumes.
- Industry promotional intensity increases more slowly than expected, helping sustain pricing and margins.
- North American growth recovers faster than expected.
- Swiss franc depreciation could improve earnings translation or competitive conditions.
- If cocoa prices remain elevated at year-end, they could put pressure on 2028 margins.
What to watch
- Whether H2 volumes are broadly flat and improve thereafter.
- FY27 pricing strategy, particularly the outcome of European Christmas negotiations, selective price cuts, and price-pack architecture.
- Demand response in mature European markets such as Germany and Switzerland to low-single-digit Christmas portfolio price cuts.
- Whether order growth in North America and Rest of World can continue.
- Supply visibility for the main cocoa crop season, particularly price and inventory trends after September.
- Additional Choco Wafer capacity in Italy and the progress of its global rollout.
- Whether marketing investment can restore consumer demand while maintaining the premium positioning.