If you have room in your investment portfolio for some new additions, then it could pay to listen to what Morgans is saying about the ASX shares in this article.
Here's why the broker is bullish on them:
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Adairs Ltd (ASX: ADH)
Morgans remains positive on this furniture and homewares retailer despite its disappointing trading update this month.
This is especially the case given its belief that improvements in consumer sentiment will boost its sales. And with rates expected to fall, this may not be far away. Morgans said:
ADH has provided a trading update for FY25, with group EBIT (pre-AASB 16) expected to be between $53.5-57.0m, which was roughly 10% lower than consensus expectations and up 1.2% on the pcp. Sales are expected to be broadly in line with expectations and up 6.2% yoy (Adairs up 9.2%, Mocka up 14.1% and Focus down 7.0%).
However, performance has been impacted by elevated levels of promotional activity and weaker AUD compared to the pcp which has impacted gross margins. We have lowered our EBIT forecast by 15%/14% in FY25 and FY26. We continue to see this business significantly leveraged into a recovery in consumer sentiment.
Morgans has a buy rating and $2.60 price target on its shares.
Collins Foods Ltd (ASX: CKF)
The team at Morgans was impressed with this KFC operator's full year results. It said:
CKF's FY25 result was materially better than expected with underlying NPAT 15% ahead of consensus mainly driven by stronger than guided margins. After a challenging 1H25, profitability materially improved in the 2H25 reflecting stronger SSS growth, cost deflation and operational efficiencies.
Morgans also notes that its guidance for the year ahead was in line with expectations. It adds:
CKF provided FY26 underlying NPAT guidance for low to mid-teens growth which was in line with consensus. Importantly, guidance does not account for much of a recovery in SSS growth from the 1H26 trading update and is driven by continued cost deflation and operational efficiencies (self-help).
As a result, the broker suspects that this guidance could prove to be conservative come the end of FY 2026. Its analysts said:
In our view, CKF providing specific NPAT guidance this early in the year (for the first time) is a strong positive endorsement from management in the outlook. CKF's track record will likely mean guidance will prove to be conservative.
In response, the broker has retained its buy rating on the quick service restaurant operator's shares with a new price target of $10.10.
