Bell Potter has been running the rule over the quick service restaurant (QSR) industry in Australia.
Let's now see whether it is bullish, bearish, or something in between on the shares of Australia's three major listed players.
Here's what the broker is saying:
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Collins Foods Ltd (ASX: CKF)
Bell Potter has initiated coverage on this KFC-focused quick service restaurant operator's shares with a buy rating and $10.80 price target.
The broker thinks that Collins Foods shares are the best value based on its forward multiples and its positive growth outlook. It explains:
We view CKF as the best-positioned QSR name due to its mix of 1) leading unit economics, 2) strong value offering at ~30% lower than its 2 key ASX-listed competitors (crucial in a consumer tightening cycle), and 3) exposure to diverse economies with a continued development pipeline in key markets, with BPe FY26e 7 new restaurants in Australia and 11 in Germany (vs. company ambition of Australia 7- 10 restaurants per annum and Germany 45-90 new restaurants over four years).
We note CKF is trading at a multiple (~14x FY27e) that we deem as cheap in comparison to its peers, when considering its recent positive SSSG and NPAT growth reiteration in March. Our confidence lies with management's strong track record of execution in domestic and international markets historically resulting in acquisitive and organic earnings growth.
Domino's Pizza Enterprises Ltd (ASX: DMP)
The broker has started with a hold rating and $18.00 price target on Domino's shares.
Although it acknowledges that its shares are trading on low multiples, it feels that this is justified based on its modest earnings growth outlook. It adds:
DMP is resetting its pricing strategy toward more profitable discounting, after a period of intense discounting to win back a customer that was lost due to previous aggressive price increases.
We note DMP is trading at a P/E multiple (~13x BPe FY27e) that we deem as appropriate in comparison to its peers, when considering our forecasted 3- year EPS CAGR of ~3%, (CKF ~11%, GYG ~53%) paired with ongoing risk within its Asia business, particularly given its overall contribution to network sales.
Guzman Y Gomez Ltd (ASX: GYG)
Bell Potter has initiated coverage on Guzman Y Gomez shares with a hold rating and $22.10 price target.
While the broker believes the burrito seller deserves a premium valuation, it is just a little too much at present to justify a buy rating. It explains:
Within Australia, GYG has the highest set of unit economics compared to CKF and DMP, due to a mix of premium menu pricing and a skew towards higher margin drive thru restaurants (~53% of total restaurant network). Moving forward, this is intended to be the strategy to boost profitability, with >85% of its 108 restaurant pipeline targeted at being drive thru format.
Since IPO, GYG has traded at ~37x trailing EV/EBITDA, a significant premium to its peers that we viewed as excessive and led by lofty expectations of US expansion. We do, however, still see a premium as warranted, underpinned by GYG's differentiated concept and growth profile that extends well beyond its domestic peers. On a forward looking basis, GYG now trades at ~24x BPe FY26e EBITDA, a level we view as still relatively elevated given future growth expectations are driven by the Australian segment.
