As expected, the Czech National Bank left interest rates unchanged at today’s meeting. According to the Bank Board, the current degree of monetary policy restriction is sufficient. At the next meeting, the central bankers will decide whether to leave rates unchanged or raise them. Reducing core inflation was identified as the key objective. As domestic inflationary pressures are currently less pronounced than anticipated in the CNB’s latest forecast, we continue to expect the key repo rate to remain at its current level for an extended period, in line with that forecast. However, given the renewed rise in market prices for energy, there is a risk of further tightening of monetary conditions. Should energy commodity prices remain at elevated levels for longer, this would increase the risk of more pronounced secondary effects on inflation, as well as a rise in inflation expectations. Compared with the CNB’s August forecast, domestic fiscal policy will also be significantly more expansionary next year.

As expected, the Czech National Bank left interest rates unchanged at today’s meeting. According to the Bank Board, the current degree of monetary policy restriction is sufficient. At the next meeting, the central bankers will decide whether to leave rates unchanged or raise them. Reducing core inflation was identified as the key objective. As domestic inflationary pressures are currently less pronounced than anticipated in the CNB’s latest forecast, we continue to expect the key repo rate to remain at its current level for an extended period, in line with that forecast. However, given the renewed rise in market prices for energy, there is a risk of further tightening of monetary conditions. Should energy commodity prices remain at elevated levels for longer, this would increase the risk of more pronounced secondary effects on inflation, as well as a rise in inflation expectations. Compared with the CNB’s August forecast, domestic fiscal policy will also be significantly more expansionary next year.

As expected, the CNB Bank Board left the repo rate at 3.75% today. All seven members of the Bank Board voted in favour of this decision. In its statement, the central bank noted that the rate hike at the June meeting has led to sufficient tightening of monetary conditions for the time being. At the same time, the rise in longer-term interest rates has also led to tighter financial conditions. At its next meeting, therefore, the Bank Board will have to decide whether to maintain stability or raise interest rates, reflecting the continued pro-inflationary balance of risks to the outlook for achieving the inflation target. At the press conference, it was noted that the main objective is now to reduce persistently elevated core inflation. The governor’s remarks placed less emphasis on factors related to developments in the external environment, such as energy commodity prices, foreign market rates and monetary policy.

Overall, data from the Czech economy was slightly less inflationary than the CNB’s latest forecast predicted. Inflation in July and August was in line with the central bank’s expectations, while core inflation was slightly higher than anticipated (more information can be found here: https://bit.ly/CPI_Aug26_EN). Economic activity was weaker than anticipated, with GDP rising by just 0.4% qoq in the second quarter of 2026 compared to an expected 0.6%. Household consumption also fell slightly short of the estimate (more information can be found here: https://bit.ly/HDP_2Q26_EN). The main negative surprise for the central bank was the growth in nominal wages, which reached 6.4% yoy in the second quarter, compared to the CNB’s forecast of 7.3%. However, this was largely due to a revision of historical data (more information can be found here: https://bit.ly/Wages_2Q26_EN).

In our view, weaker domestic developments are primarily offset by foreign factors. So far, the koruna exchange rate has moved largely in line with the central bank’s projected average for the third quarter: EURCZK 24.20. The CNB’s August forecast was also consistent with a broadly stable key repo rate near the current level of 3.75%. Under normal circumstances, weaker domestic fundamentals would push rates lower. However, this is being offset by higher expected foreign interest rates, particularly in the Eurozone, and renewed energy price increases.

After a temporary increase in inflation, a restrictive monetary policy should help to gradually return inflation to the 2% target in the second half of next year. We estimate that inflation will continue to rise for the remainder of this year, mainly due to an increase in the yoy growth rate of food and regulated prices, peaking in February next year at over 3%. Core inflation is likely to remain near 3% yoy until the beginning of next year. However, according to our forecast, it should then gradually decline towards 2.5% by the end of 2027.

The risks are skewed towards further tightening of domestic monetary policy. We are maintaining our monetary policy rate forecast, which expects the CNB to keep interest rates at their current levels for the remainder of this year and throughout next year. However, there is an upside risk to inflation, primarily linked to the protracted conflict in the Middle East. This increases the likelihood of more pronounced secondary effects stemming from higher energy prices and disruptions to global supply chains. Should energy commodity prices remain high for an extended period, this could also result in a rise in inflation expectations. Fiscal policy also poses a significant pro-inflationary risk compared with the CNB’s forecast. According to the proposed budget, the public finance deficit is expected to widen to 3.5% of GDP next year rather than the 2.9% projected by the central bank (more information can be found here: https://bit.ly/Budget_2027_EN).

Colt CZ reported yoy EBITDA growth of +119% for 2Q26. This exceeded the consensus estimate by a substantial +18.3%. The margin increased to 29.4% (+8.5pps). This substantial increase was driven by organic growth of +49% in 2Q26 and the consolidation of the high-margin company NCL. Furthermore, Colt has raised its full-year forecasts. We expect the consensus to rise.

Colt CZ reported yoy EBITDA growth of +119% for 2Q26. This exceeded the consensus estimate by a substantial +18.3%. The margin increased to 29.4% (+8.5pps). This substantial increase was driven by organic growth of +49% in 2Q26 and the consolidation of the high-margin company NCL. Furthermore, Colt has raised its full-year forecasts. We expect the consensus to rise.

Revenue for 2Q26 was CZK8.6bn, representing a yoy increase of +56%. The firearms segment grew by almost +53% yoy, accounting for 52.6% of total revenue. This significant increase was primarily driven by MLE deliveries. There was also positive growth in Colt CZ’s main firearms market in the United States (commercial). Overall, revenue in the United States grew by +11.4% qoq. The total number of firearms sold in 2Q26 reached almost 170,000, exceeding our estimates by +6.2%. This is likely due to a revival of the US commercial market. The ammunition segment accounted for 30.8% of revenue, growing by +4.9% yoy. This segment is traditionally very strong in Europe, where the company generates 83% of its ammunition revenue. Since the beginning of the year, the new energy materials segment (NCL) has accounted for 16.6% of total revenue. However, this segment has the highest margins by far. In 2Q26 alone, the EBITDA margin for NCL reached 56.7%. The ammunition sector's margin is 32.8%, while the firearm sector's is 18.8%. Total EBITDA for 2Q26 reached CZK2.5bn, an increase of +119 %yoy, and exceeded the market consensus by a substantial +18.3%. This strong yoy growth is driven by organic growth and, in particular, the consolidation of the acquired NCL. The EBITDA margin stands at 29.4%. This increase of +8.5pps yoy is due to the inclusion of NCL’s high-margin business. Organic EBITDA growth (excluding energy materials) was +49% yoy. This was driven by higher firearms sales (+27.4% yoy), a recovery in the US commercial market, and MLE deliveries in Europe, Canada, and Asia.

Net profit after minority interests for 2Q26 was CZK0.757bn (+62.2% yoy). However, adjusting this figure further for PPA — a non-cash accounting item relating to the acquisitions of S&B and NCL — brings the net profit up to CZK1.1bn (+79.5% yoy).

Leverage stood at 2.17x (net debt/EBITDA) in 1H26. This represents an increase from 1.8x at the end of 2025 (2.2x in 1Q26). Leverage rose due to the acquisition of NCL, which took place at the start of this year.

2026 Guidance: Colt has increased its targets for this year. EBITDA is now expected to reach CZK8.0–8.5bn, which is an increase of +3.7% (at the upper end) compared with the previous forecast of CZK7.4–8.2bn. The lower end of the revenue range has also been increased, from CZK30–33bn to CZK31–33bn. Colt should aim to reach the upper end of the target range. This would represent yoy growth of +82.4% and +41% for EBITDA and revenue respectively. The figures announced for the first half of 2026 represent 54.2% and 48.1% of the FY projections for EBITDA and revenue, respectively, compared with the upper end of Colt’s target. We expect market estimates to rise (CZK8.1bn EBITDA and CZK31.2bn revenue). Our estimates for this year are CZK7.7bn for EBITDA and CZK32.8bn for revenue.