Citi Lifts Collins Foods Price Target to A$9.12 but Maintains Neutral Rating on Growth Concerns

Citi has increased its price target for Collins Foods Ltd. (ASX:CKF) following a positive sales update, but the investment bank maintained its Neutral rating on the KFC operator, signaling reservations about the sustainability of its growth.

Price Target and Sales Performance

In a note to clients, Citi lifted its 12-month price target on Collins Foods to A$9.12 from a previous A$8.77, representing a 4% increase. The adjustment was prompted by the company's latest sales report, which showed a 6.6% rise in total sales for the first 17 weeks of fiscal year 2027 compared to the same period last year.

Based on this performance, the brokerage raised its earnings forecasts for the company for fiscal years 2027 and 2028 by 1% each.

Analyst Concerns Temper Outlook

Despite the improved short-term outlook, Citi expressed caution regarding several key areas of the business, underpinning its decision to retain a Neutral rating. The bank highlighted weak sales productivity in Germany, a region the firm noted is a significant part of the company's growth plans.

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Additionally, Citi raised questions about the long-term sustainability of growth initiatives in Australia. The bank pointed to management's efforts to use menu innovations to offset the impact of labor inflation and rising costs of goods sold.

Market Context

Citi's cautious stance is more conservative than the broader analyst community. According to LSEG data, 12 analysts covering Collins Foods hold an average Buy rating with a mean price target of A$10.50.

The price target update comes amid a challenging period for the company's stock, which has declined 19.7% year-to-date.