CKF: FY26 Result

Research evidence excerpt

CKF: FY26 Result

inflation. We believe strong SSSg All values in AUD unless otherwise noted.

momentum can continue to be supported by extended trading and the Priced as of prior trading day's market close, EST (unless otherwise noted).

national rollout of Kwench, with further upside potential if breakfast proves

to be successful. Management affirmed a ~$20m impact from junior wages,

which aligns with our previously provided forecast.

Europe first 8 weeks raises eyebrows. $44.9m EBITDA +7.1% beat to RBCe,

+3.0% beat to cons. Revenue $351.3m +2.6% beat to RBCe, +3.1% beat to

cons. FY26 SSSg came in largely ~in line with RBCe, but first 8 weeks SSSg

of -7.2% for Germany and -7.8% for Netherlands is significantly below

our 1H27 SSSg forecast for Europe (+3.2%). Company is citing factors that

we view as largely temporary: 1) Iran impacts (confidence, fuel, and in

our view potentially boycotts); 2) heatwave affecting restaurant traffic; and

3) lapping Squid Game LTO in the pcp. KFC's Squid Game LTO should roll

out of the pcp by July, heatwave impacts should extend into July and the

timing around Iran impacts remains uncertain. Management also admitted

that there is likely more that can be done from a promotional execution

standpoint to stimulate demand. We believe Yum! remains committed

to succeeding in Germany and we remain positive on the longer-term

opportunity there.

Outperform, $12.00/share PT. Reduced underlying NPAT in FY27e by

-3.3% reflecting softer revenue and earnings in Europe. In Australia, we

increased our revenue estimate by +1.6% in FY27 reflecting stronger

trading momentum, offset by conservative forecasts for channel mix drag

and wage inflation leading to 20bps lower EBITDA margins in FY27 vs

previous forecast.