Barclays has initiated coverage of THG with an "equal weight" recommendation and a 42 pence price objective, forecasting that the company will deliver compound annual earnings growth of 12% between 2026 and 2028. The brokerage firm said the principal catalyst for that improvement is a rebound in margins at THG's Nutrition business as input costs for whey proteins fall.
The bank's 42p target sits 6.6% higher than THG's closing share price of 39 pence on Nov. 10. Barclays also projects THG will produce £27 million of free cash flow in 2026, a figure that falls inside the company guidance range of £25 million to £35 million and represents a swing from a £51.8 million cash outflow in 2025.
Barclays highlighted the Nutrition division's margin deterioration and the expected path to recovery. Nutrition's EBITDA margin declined to 4.7% in 2025 from 13.5% in 2023 amid a rise in whey protein prices. The bank models a recovery to a 7.6% Nutrition EBITDA margin in 2026 and to 9.2% in 2027.
On the supply side, THG reported that prices for WPC80, a specific grade of whey protein, had fallen by roughly 20% since the company's interim results on Sept. 10. Management has secured fourth-quarter supply at lower prices than in the third quarter, and the company said it is arranging first-quarter 2027 supply "below prevailing market rates".
Across divisions, Barclays expects differing growth trajectories: it forecasts annual EBITDA growth of 6% for THG's Beauty arm and 17% for Nutrition over the bank's projection period. Despite that operating growth, Barclays cautioned that interest and lease expenses will constrain how much of the EBITDA improvement converts into reported cash and pretax profit. The bank's model produces adjusted pretax profit of around £4 million in 2027.
Balance sheet metrics are central to Barclays' assessment. THG's gross debt was £430 million at the end of 2025, and cash interest expense for that year amounted to £46 million. Barclays noted that proceeds from a VAT claim, estimated at about £78 million based on figures THG has cited, together with possible asset sales, could speed reduction of the group's leverage.
In support of potential deleveraging, THG completed the sale of Claremont Ingredients for £103 million in August 2025 and said other assets "have attracted bid interest". The company expects that net proceeds from future disposals will exceed the Claremont sale and could shift the group from net debt to net cash positive for fiscal year 2027.
Barclays also requested clearer detail on THG's commercial relationship with Ingenuity, the business THG demerged, noting that THG purchased £495 million of goods and services from Ingenuity in 2025.
Valuation assumptions underpin Barclays' view: the bank applies a 12 times EBITDA multiple to Nutrition and an eight times multiple to Beauty, before subtracting net debt including leases. Its EBITDA forecasts sit around 2% below consensus for 2026 and 2027, reflecting what Barclays characterises as a slightly slower recovery in Nutrition margins compared with market expectations.
To illustrate downside and upside risks, Barclays set an upside scenario at 81 pence per share and a downside case at 23 pence per share, the latter contingent on whey prices remaining elevated or rising again. THG has historically provided an update on fourth-quarter trading in mid-January.
Contextual takeaways
- Barclays' coverage frames margin recovery in Nutrition as the main driver of earnings improvement across 2026-2028.
- Near-term cash and profit are likely to be constrained by interest and lease costs despite positive EBITDA trajectories.
- Balance sheet repair could be accelerated by VAT claim proceeds and further asset disposals, according to Barclays and THG's statements.