Download PDF

1. Company Snapshot

1.a. Company Description

Yum China Holdings, Inc.owns, operates, and franchises restaurants in China.The company operates through two segments, KFC and Pizza Hut.


It operates restaurants under the KFC, Pizza Hut, Little Sheep, Huang Ji Huang, Lavazza, COFFii & JOY, Taco Bell, and East Dawning brands, which specialize in chicken, pizza, hot pot cooking, simmer pot, Italian coffee, specialty coffee, Mexican-style food, and Chinese food categories.The company also operates V-Gold Mall, a mobile e-commerce platform, which sells electronics, home and kitchen accessories, and other general merchandise, as well as fried rice, steak, pasta and other ready meals, and coffee capsules.In addition, it operates franchise restaurants under the KFC, Pizza Hut, Huang Ji Huang, Taco Bell, Little Sheep, East Dawning, Lavazza, and COFFii & JOY names.


As of March 31, 2022, the company operated 12,117 restaurants in approximately 1,700 cities.Yum China Holdings, Inc.was incorporated in 2016 and is headquartered in Shanghai, China.

Show Full description

1.b. Last Insights on YUMC

The recent 3-month performance of Yum China Holdings, Inc. was negatively impacted by seasonality affecting quarterly performance, despite a 4.1% YoY increase in Q4 revenue to $2.5B, driven by KFC and Pizza Hut. The company's high-quality business model, digital adaptation, and membership sales strategy have enhanced customer retention and operational efficiency, leading to improved margins and stable cash returns. However, the macroeconomic challenges and fiscal stimulus in China have created uncertainty, potentially affecting the company's future performance.

1.c. Company Highlights

2. Yum China's Q3 Earnings: A Solid Performance

Yum China achieved a solid third quarter, with system sales growing 4% year-over-year, outpacing the China restaurant industry. The company's same-store sales grew for the second consecutive quarter, with KFC's same-store sales growing 2%. Restaurant margin expanded to 17.3%, driving an 8% year-over-year increase in operating profit to $400 million, a quarter 3 record for adjusted operating profit. The company's earnings per share (EPS) came in at $0.766, slightly beating estimates of $0.76. The strong performance was driven by the company's dual focus on innovation and operational efficiency, with delivery sales accounting for 51% of total sales, up from 40% in the same quarter last year.

Publication Date: Nov -05

📋 Highlights
  • Store Expansion Acceleration:: Added 536 net new stores, total count exceeding 17,500, with 2025 target of 1,600–1,800 net new stores.
  • Sales Growth Outpacing Industry:: System sales rose 4% YoY, same-store sales growth for second consecutive quarter (KFC: +2%, Pizza Hut: accelerated openings).
  • Margin Expansion & Profit Growth:: Restaurant margin hit 17.3%, driving 8% YoY operating profit increase to $400M, a Q3 record.
  • Delivery Dominance:: Delivery sales contributed 51% of total sales (up from 40% YoY), with ongoing efficiency optimization and cost-saving initiatives.
  • Shareholder Returns & Guidance:: Returned $950M to shareholders YTD, targeting $1.5B in 2025; maintains mid-single-digit system sales growth and margin improvement guidance.

Financial Performance

The company's financial performance was strong, with a 4% year-over-year increase in system sales and an 8% increase in operating profit. The restaurant margin expansion was a key driver of the profit growth, and the company's EPS beat estimates. The company's return on equity (ROE) is 15.73%, indicating a strong return on shareholders' equity. The company's valuation metrics, such as the P/E ratio of 18.25 and EV/EBITDA of 10.69, indicate that the stock is reasonably valued.

Store Expansion and Delivery Growth

Yum China's store expansion accelerated in Q3, with 536 net new stores, taking the total store count to over 17,500. The company is focusing on smaller formats and franchise stores, with a roughly 10% expansion in Q3 leading to around 4% sales growth. The company's delivery sales grew significantly, with delivery sales accounting for 51% of total sales. The company is optimizing delivery efficiency and working on cost-saving initiatives, particularly on rider costs.

Guidance and Outlook

The company expects a similar same-store sales performance in Q4 as in Q3. The company is targeting 1,600 to 1,800 net new stores in 2025 and maintaining its CapEx target of $600 million to $700 million. The company's guidance is in line with analysts' estimates, with a revenue growth rate of 5.5% expected for next year. The company's focus on innovation, operational efficiency, and growth initiatives, including KPRO and KCOFFEE, is expected to drive sales and profit growth.

Valuation and Dividend Yield

The company's valuation metrics, such as the P/E ratio and EV/EBITDA, indicate that the stock is reasonably valued. The company's dividend yield is 1.96%, indicating a relatively stable return for shareholders. The company's free cash flow yield is 5.15%, indicating a strong return on investment. Overall, the company's solid Q3 performance and guidance indicate a strong outlook for the company.

3. NewsRoom

Card image cap

Yum China $YUMC Shares Sold by Barings LLC

Nov -23

Source: defenseworld.net

Card image cap

Yum China Holdings, Inc. (YUMC) Analyst/Investor Day Transcript

Nov -21

Source: seekingalpha.com

Card image cap

Connor Clark & Lunn Investment Management Ltd. Sells 164,091 Shares of Yum China $YUMC

Nov -21

Source: defenseworld.net

Card image cap

Allworth Financial LP Purchases 2,202 Shares of Yum China $YUMC

Nov -17

Source: defenseworld.net

Card image cap

Yum China Unveils "RGM 3.0" Strategy and Three‑Year Financial Outlook at 2025 Investor Day

Nov -17

Source: prnewswire.com

Card image cap

Yum China to Host Investor Day on November 17, 2025

Nov -10

Source: prnewswire.com

Card image cap

Yum China Holdings, Inc. (YUMC) Q3 2025 Earnings Call Transcript

Nov -04

Source: seekingalpha.com

Card image cap

Yum China (YUMC) Reports Q3 Earnings: What Key Metrics Have to Say

Nov -04

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.81%)

6. Segments

KFC

Expected Growth: 4.8%

Yum China’s KFC chain is poised for growth driven by increasing demand for convenient, affordable dining and a growing middle class in China, as well as the brand’s successful digitalization efforts and menu innovations.

All Other Segments

Expected Growth: 4.5%

Yum China's non-core segments, including East Dawning and Coco, will drive growth through expansion into new markets and increased demand for convenience and delivery services.

Pizza Hut

Expected Growth: 4.5%

Yum China Holdings’ Pizza Hut segment growth is driven by increasing demand for convenience food, rising disposable income, and expansion into smaller cities and towns in China.

Corporate and Unallocated

Expected Growth: 5.4%

Yum China's Corporate and Unallocated segment growth is driven by increasing demand for digital payments, and investments in customer experience, which will continue to offset unallocated costs, driving a 5.4% CAGR.

Elimination

Expected Growth: 3.5%

Yum China Holdings, Inc.’s strategic elimination of unprofitable or underperforming locations is expected to drive growth, as resources are reallocated to high-potential areas, improving overall efficiency and profitability.

7. Detailed Products

KFC

KFC is a fast-food chain that specializes in fried chicken and other chicken-based meals.

Pizza Hut

Pizza Hut is a pizza chain that offers a variety of pizzas, pastas, and other Italian-American cuisine.

East Dawning

East Dawning is a Chinese fast-food chain that offers a variety of traditional Chinese dishes, including congee, noodles, and rice bowls.

Little Sheep

Little Sheep is a hot pot chain that offers a variety of hot pot options, including soup bases, meats, and vegetables.

COFFii & JOY

COFFii & JOY is a coffee shop chain that offers a variety of coffee drinks, pastries, and snacks.

Tao Xi

Tao Xi is a Chinese fast-food chain that offers a variety of traditional Chinese dishes, including noodles, rice bowls, and snacks.

8. Yum China Holdings, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Yum China Holdings, Inc. faces moderate threat from substitutes as consumers have various options for dining out or ordering in, but the company's strong brand recognition and loyalty programs help to mitigate this threat.

Bargaining Power Of Customers

Yum China Holdings, Inc. has a large customer base, but individual customers do not have significant bargaining power due to the company's large scale and diversified customer base.

Bargaining Power Of Suppliers

Yum China Holdings, Inc. has a moderate level of dependence on suppliers, particularly for ingredients and packaging materials, but the company's scale and negotiating power help to mitigate this threat.

Threat Of New Entrants

Yum China Holdings, Inc. operates in a highly competitive market, but the company's strong brand recognition, established supply chain, and regulatory hurdles make it difficult for new entrants to gain significant market share.

Intensity Of Rivalry

Yum China Holdings, Inc. operates in a highly competitive market with many established players, leading to intense rivalry and pricing pressure, but the company's strong brand recognition and operational efficiency help to mitigate this threat.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 28.37%
Debt Cost 3.95%
Equity Weight 71.63%
Equity Cost 6.21%
WACC 5.57%
Leverage 39.61%

11. Quality Control: Yum China Holdings, Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Haier Smart Home

A-Score: 7.2/10

Value: 5.2

Growth: 5.9

Quality: 7.9

Yield: 7.5

Momentum: 7.0

Volatility: 10.0

1-Year Total Return ->

View Full Report
Stock-Card
Yum!

A-Score: 5.9/10

Value: 4.0

Growth: 4.8

Quality: 6.4

Yield: 4.0

Momentum: 7.0

Volatility: 9.3

1-Year Total Return ->

View Full Report
Stock-Card
McDonald's

A-Score: 5.5/10

Value: 3.6

Growth: 4.8

Quality: 6.5

Yield: 4.0

Momentum: 4.0

Volatility: 10.0

1-Year Total Return ->

View Full Report
Stock-Card
Yum China Holdings

A-Score: 5.4/10

Value: 3.3

Growth: 6.0

Quality: 6.2

Yield: 1.7

Momentum: 5.0

Volatility: 10.0

1-Year Total Return ->

View Full Report
Stock-Card
MakeMyTrip

A-Score: 5.3/10

Value: 2.2

Growth: 8.4

Quality: 6.9

Yield: 0.0

Momentum: 5.0

Volatility: 9.0

1-Year Total Return ->

View Full Report
Stock-Card
Chipotle Mexican Grill

A-Score: 3.9/10

Value: 2.2

Growth: 8.4

Quality: 5.7

Yield: 0.0

Momentum: 1.0

Volatility: 6.0

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

46.23$

Current Price

46.23$

Potential

-0.00%

Expected Cash-Flows