Classification of NuWays AG to Lang & Schwarz AG

Company Name:	Lang & Schwarz AG
ISIN:	DE000LS1LUS9
Reason for the research:	Initiation
Recommendation:	BUY
Target price:	EUR 20
Target price on sight of:	12 months
Last rating change:
Analyst:	Simon Keller

Trading the retail renaissance; INITIATE WITH BUY

The market is pricing Lang & Schwarz as if its story ended with Trade Republic. We disagree. The payment for order flow (PFOF) ban and Trade Republic's abrupt change in order routing and trading technology have reset earnings, but not the franchise. What remains is a profitable retail-market-making platform with proprietary technology, substantial capital and a highly attractive Structured Products business. The focus should now shift from the earnings lost to the quality and growth potential that remain.

The moat was built trade by trade. 30 years of pricing and risk decisions are embedded in L&S' models, technology and routines. Around 60% of its c. 100 employees work in trading or IT, while two data centres and € 207m of capital including the fund for general banking risks provide reliability and risk-bearing capacity. These capabilities support quotes on more than 50,000 securities and distribution through over 20 partners with access to more than 25m retail clients. Smaller, less information-sensitive retail orders create attractive economics. Together, this gives L&S a mature, capital-backed platform that can monetise retail flow across products, partners and market cycles.

Structured Products are set to become the profit engine. Already in FY25, the segment generated € 55m, or 38%, of group trading result on less than 1% of volume. Including Treasury, this equates to c. € 83 trading profit per executed trade versus c. € 0.84 in TradeCenter. With TradeCenter economics now reset, we expect Structured Products to account for the majority of group earnings from H2 26 onward. Rapid automated issuance captures shifts in retail demand, while wikifolio adds recurring fees of an estimated c. € 7m p.a. before performance fees.

Growth has several routes back. Only 38% of German adults hold investments, well below Nordic markets. Germany already counts c. 5m investors below 40, a sizeable cohort still at an early stage of wealth accumulation. As their portfolios and experience grow, funded brokerage accounts should increasingly translate into equity and leveraged-product activity. Orders in structured securities at selected German venues grew at an 11% CAGR from 2015 to 2025, with leveraged products accounting for 96% of 2025 orders. This decade-long expansion demonstrates a structural trend beyond isolated volatility spikes, in our view. New partnerships and the planned Multi-Market-Maker model offer additional growth potential, with our estimates allowing for only a modest initial contribution pending greater visibility.

Q3 2026 marks the clean starting point. H1 26 still reflects the former PFOF regime and the historically large Trade Republic flow. From Q3 onward, the PFOF ban and routing change are fully reflected, making FY27e the first fully standalone year. Its yoy comparison will look weak due to the exceptional H1 26 comparison, but against the annualised clean H2 26e base, our FY27e estimates imply c. 7% growth in trading result and c. 33% growth in adjusted net profit. As cost measures take full effect, FY27e should mark the beginning of renewed earnings growth under the post-PFOF setup.

The de-risked earnings base deserves a new valuation. L&S trades at only 7.9x FY27e PER, versus peers at 10.3x. Our residual income model, based on € 193m of economic book value, supports our PT of € 20, implying c. 30% upside. INITIATE with BUY.

You can download the research here: lang-schwarz-ag-2026-10-14-fullnoteinitiation-en-e030b
For additional information visit our website: https://www.nuways-ag.com/research

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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Offenlegung möglicher Interessenkonflikte nach § 85 WpHG beim oben analysierten Unternehmen befindet sich in der vollständigen Analyse.
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