Starting to Win, But at What Cost? Raising Ests and PT But Stay Underweight, +10Qs For Management

We nudge up our forecasts: Sodexo's FY26 results were better than expected, with organic growth of +2.0% versus conservative guidance of +1.2-1.5%, a 3.4% margin at the top of the downgraded 3.2-3.4% range, and €379m FCF versus a €200-300m indication. FY27 guidance was unchanged at +2-3% organic sales and flat margins. The call provided some encouragement that the commercial turnaround is gaining traction, with development of 7.7% accelerating in H2 even excluding the Meta win, and retention improving to 94.4%. On the flip side, higher financing costs partly offset the higher margin base, retention remains an ongoing challenge, visibility on pipeline profitability is low, and FY27's higher restructuring costs and capex mean minimal FCF and leverage rising again. We raise EPS forecasts by 2-4% and lift our price target to €55 from €50 on higher earnings and lower net debt, but remain Underweight given 8% downside from the current share price and a CY27e P/E of 17x that already factors i