Brokers are excited by the potential of a particular S&P/ASX 200 Index (ASX: XJO) share – Collins Foods Ltd (ASX: CKF). This business is a major franchisee operator of KFCs in Australia, Germany and the Netherlands.
The business recently reported its FY26 half-year result, which included a number of positives. Total revenue increased 6.6% to $750.3 million, underlying operating profit (EBIT) grew 20% to $63 million and underlying net profit climbed 29.5% to $30.8 million.
According to a collation of analyst opinions on the ASX 200 share, there are (at least) seven buy ratings on the business. That makes it a well-liked business and suggests there could be an opportunity here.
Let's take a look at what analysts are attracted to regarding this business.
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Further profit growth projected
Broker UBS said in a note after seeing the result that Collins Foods' value proposition is resonating with consumers against a backdrop of a challenging operating environment.
UBS noted that not many Australian consumer-facing ASX 200 shares have increased like-for-like sales in the last four months, yet KFC Australia did, with an improvement from 2.3% to 3.6%.
The broker said that if these conditions continue, along with usual seasonality and one extra trading week, it sees scope for "$9 million EBITDA upside".
Conditions are more challenging in Europe, though an improvement in the impact of avian flu and changes to the sales tax (VAT) could still result in year-over-year EBITDA growth.
UBS likes the ongoing strength of the Australian KFC business, combined with the potential for market share growth in Germany.
However, the broker did acknowledge that ongoing losses at Taco Bell Australia are a drag on the ASX 200 share's profitability, suggesting a 9% negative impact to earnings per share (EPS) because of it.
UBS is projecting that Collins Foods' earnings per share could grow at a compound annual growth rate (CAGR) of 19% and even more if the losses from Taco Bell are excluded.
ASX 200 share valuation
According to the projections from UBS, the business is forecast to deliver $61 million of net profit in FY26, putting it at 21x FY26's estimated earnings.
The broker estimates the business could deliver net profit of $74 in FY27, $87 million in FY28, $103 million in FY29 and $109 million in FY30. Therefore, net profit could close to double between FY26 and FY30, which is a strong tailwind for potential Collins Foods share price growth.
UBS has a price target of $13.10 on the business, implying a possible rise of 24% over the next year.
