Innovation & Operational Efficiency JOEY WAT CHIEF EXECUTIVE OFFICER Cautionary Statements Forward-Looking Statements. This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that the ...

Investment Rating - The report maintains an "Outperform" rating for Yum China Holdings [2][7] Core Insights - Yum China held its 2025 Investor Day on November 17, launching the "RGM 3.0" strategy, focusing on resilience, growth, and competitive advantage, with innovation and efficiency as dual drivers [3][13] - The company targets over 30,000 stores by 2030, with specific store count goals of 20,000 by 2026 and 25,000+ by 2028 [4] - Revenue projections for 2025-2027 are USD 11.63 billion, USD 12.16 billion, and USD 12.76 billion, with year-over-year growth rates of 2.9%, 4.6%, and 4.9% respectively [7][14] Financial Projections - Adjusted net profits are expected to be USD 911 million in 2025, USD 1.03 billion in 2026, and USD 1.13 billion in 2027, with growth rates of 0.0%, 12.8%, and 10.2% respectively [7][14] - The company anticipates a gross profit margin (GPM) of 68.7% in 2025, increasing to 69.9% by 2027 [10][12] - The report projects a diluted EPS of USD 2.52 for 2025, increasing to USD 3.13 by 2027 [10][12] Expansion Strategy - Franchise empowerment is a core strategy, with plans to open over 3,000 new franchise stores from 2026 to 2028, with franchise stores making up 40%-50% of new openings for both KFC and Pizza Hut [4] - The company aims to enhance restaurant profitability, targeting an operating profit margin of at least 11.5% by 2028 [4] New Business Developments - New business initiatives, including KFC Coffee and KPRO, are expected to exceed initial growth expectations, with KFC Coffee projected to surpass 5,000 stores by 2029 [5] - The company plans to return approximately 100% of free cash flow to shareholders starting in 2027, with expected annual shareholder returns of USD 900 million to USD 1 billion [5]

Core Insights - Yum China Holdings, Inc. has set ambitious growth targets, aiming to reach 20,000 stores by 2026, over 25,000 by 2028, and over 30,000 by 2030 [1][3] - The company is focusing on expanding its store network, driving sales growth, and enhancing profitability through various strategic initiatives [1][3] Store Expansion Goals - The company plans to double its store count from 10,000 to 20,000 within six years, a significant acceleration compared to the previous 33 years to reach the first 10,000 [1] - KFC aims to increase its store count to over 17,000 by 2028, with a target operating profit exceeding RMB 10 billion [1] - Pizza Hut plans to add over 600 new stores annually for the next three years, targeting over 6,000 stores by 2028 [1] Emerging Business Models - New business models like KFC Coffee and KPRO are expected to exceed growth expectations, with KFC Coffee projected to surpass 5,000 locations by 2029 [2] - Pizza Hut's WOW model focuses on "everyday low prices," reducing single-store investment by nearly 50% and expanding into lower-tier cities [2] - Lavazza Coffee is set to expand significantly, aiming for over 1,000 stores and $60 million in retail sales by 2029 [2] Market Opportunities - The company sees significant opportunities in the Chinese market, currently serving about one-third of consumers, with a goal to increase this to about half [3] - The penetration rate of chain restaurants in China is only about 20%, compared to over 50% in developed countries like the U.S. [3] Strategic Framework - Yum China has introduced the RGM 3.0 strategy, focusing on resilience, growth, and competitive advantage, with an emphasis on innovation and efficiency [3][4] - The company is leveraging resource sharing and integration across its brands to create stronger synergies [4] Commitment to Shareholders - The company plans to return approximately 100% of its free cash flow to shareholders starting in 2027, after paying dividends to minority shareholders [4][5] - Yum China expresses confidence in achieving its growth targets and continuing to create value for shareholders [5]

Core Insights - Yum China aims to achieve over 10 billion RMB in operating profit for KFC by 2028 and plans to double Pizza Hut's operating profit by 2029 compared to 2024 [1] Expansion Goals - The company targets a total of 20,000 stores by 2026, over 25,000 by 2028, and aims to exceed 30,000 by 2030 [1] - KFC plans to increase its store count by approximately one-third to over 17,000 by 2028 [1] - Pizza Hut aims to add over 600 new stores annually for the next three years, reaching over 6,000 stores by 2028 [1] Emerging Businesses - KFC's coffee brand, Kenuo Coffee, has surpassed 1,800 locations and is expected to exceed 5,000 by 2029 [2] - KPRO, focusing on light meals, opened over 100 stores in more than 20 cities within a year and aims for a thousand-store scale in five years [2] - Pizza Hut's WOW model has reduced single-store investment by nearly 50% and is expanding rapidly in lower-tier cities [2] Market Opportunities - Yum China sees early signs of recovery in consumer sentiment, with increased foot traffic and effective marketing [3] - The company currently serves about one-third of Chinese consumers and aims to increase this to about half [3] - The penetration rate of chain restaurants in China is around 20%, significantly lower than over 50% in developed countries like the U.S. [3] Strategic Focus - The company has introduced the RGM 3.0 strategy, emphasizing resilience, growth, and competitive advantage [3] - The strategy incorporates a dual approach of "innovation and efficiency" and a development philosophy of "front-end layering and back-end aggregation" [3] Resource Integration - Yum China is enhancing synergy through resource sharing and integration across stores, regions, and brands [4] - The company compares its structure to a bamboo forest, with various brands supported by a robust underlying network developed over nearly 40 years [4] Shareholder Commitment - The company plans to return approximately 100% of its free cash flow to shareholders starting in 2027, after paying dividends to minority shareholders [5] - Yum China expresses confidence in achieving its growth targets and continuously creating value for shareholders [5]

Core Viewpoint - Yum China is accelerating its store network expansion and enhancing sales growth and profitability through strategic initiatives presented during the 2025 Investor Day event held in Shenzhen on November 17 [1] Group 1: Growth Targets - The company has set a new growth target to reach a total of 20,000 stores by 2026 [1] - By 2028, the total number of stores is expected to exceed 25,000 [1] - The company aims to surpass 30,000 stores by 2030 [1] Group 2: Brand-Specific Goals - For KFC, the number of stores is projected to increase by approximately one-third to over 17,000 by 2028, with an operating profit target of over 10 billion yuan [1] - Pizza Hut plans to add more than 600 new stores annually over the next three years, aiming to exceed 6,000 stores by 2028 [1]

Core Insights - The article highlights a trend of multinational companies, particularly in the food and beverage sector, increasingly opting for joint ventures and local partnerships in China to enhance growth and localization strategies [1][10][15]. Group 1: Joint Ventures and Partnerships - Starbucks announced a joint venture with Boyu Capital, selling up to 60% of its Chinese operations for an estimated valuation of $4 billion (approximately 284.84 billion RMB) [3][10]. - CPE Yuanfeng has formed a joint venture with Restaurant Brands International (RBI) to take over Burger King's operations in China, with CPE holding approximately 83% and RBI retaining about 17% [1][10]. - The trend of forming joint ventures is not new; McDonald's previously sold 80% of its China operations to a consortium led by CITIC and Carlyle in 2017, while Yum China was spun off from Yum Brands in 2016 [3][11][15]. Group 2: Growth and Localization Strategies - Starbucks aims to expand its store count in China from 8,000 to 20,000, leveraging Boyu's local expertise to penetrate smaller cities and emerging regions [3][10]. - Burger King plans to increase its store count from 1,250 to over 4,000 with the support of CPE Yuanfeng, focusing on product upgrades and digital transformation [3][10]. - McDonald's set a goal to grow its store count from 2,500 to 4,500 within five years after partnering with CITIC and Carlyle, emphasizing delivery and digital trends [3][10]. Group 3: Market Dynamics and Competition - The Chinese market is significant, with McDonald's identifying it as its second-largest and fastest-growing market globally, contributing about 8% to Starbucks' revenue [5][6]. - The competitive landscape is shifting, with local players like Luckin Coffee and Wallace rapidly gaining market share, prompting international brands to rethink their strategies [7][19]. - Starbucks' market share in China has declined from 42% in 2017 to an estimated 14% in 2024, indicating increasing competition from local brands [6][19]. Group 4: The Role of Local Partners - The introduction of local partners is seen as a crucial strategy for navigating the complexities of the Chinese market, as evidenced by the success of brands like Luckin Coffee and Heytea [9][29]. - The partnership model allows foreign brands to maintain brand ownership while leveraging local expertise for operational execution, enhancing their adaptability in a competitive environment [29][30]. - The article emphasizes that successful localization does not mean abandoning brand values but rather adapting to local consumer preferences and market dynamics [34][36].

Group 1 - The core strategy of Pizza Hut in China includes expanding its presence to approximately 1,500 cities where KFC operates but Pizza Hut does not, with plans to add over 600 new stores annually for the next three years, aiming to exceed 6,000 stores by 2028 [1] - The company plans to return approximately 100% of its free cash flow to shareholders starting in 2027, with shareholder returns expected to surpass $1 billion by 2028 [1] - KFC aims to achieve operating profits exceeding 10 billion RMB by 2028, while Pizza Hut is projected to double its operating profit by 2029 compared to 2024 [1] Group 2 - Yum! Brands has initiated a strategic evaluation of Pizza Hut, which has garnered significant market attention [2] - The CFO of Yum! China expressed confidence in Pizza Hut's brand strength in China, despite the ongoing strategic evaluation by Yum! Brands [2] - In Q3 2025, Yum! China reported total revenue of $3.2 billion, a 4% year-over-year increase, with system sales and operating profit also growing by 4% and 8% respectively [2] Group 3 - In Q3 2025, Yum! China achieved a record net addition of 536 stores, with a franchise store ratio of 32%, bringing the total number of stores to 17,514, including 12,640 KFC and 4,022 Pizza Hut locations [3]

Core Insights - Yum China announced at its 2025 Investor Day that KFC China aims to achieve an operating profit exceeding 10 billion by 2028, with a total number of stores surpassing 17,000 [1]

Core Insights - Yum China announced plans to return approximately 100% of free cash flow to shareholders starting in 2027, after deducting dividends paid to minority shareholders [1] - The company expects shareholder returns to exceed $1 billion by 2028 [1] - Yum China anticipates a total store count of over 25,000 by 2028, with an operating profit margin of no less than 11.5% [1] - The company aims to surpass 30,000 stores by 2030 [1]

Core Insights - Yum China revealed plans for Pizza Hut to expand its presence in China, targeting an increase in store count and profitability by 2029 [1] Expansion Plans - Currently, Pizza Hut operates in approximately 1000 cities in China, with around 1500 cities having KFC but lacking Pizza Hut [1] - The company plans to add over 600 new stores annually for the next three years, aiming to exceed 6000 total stores by 2028 [1] Profitability Goals - Pizza Hut is expected to enhance restaurant profit margins and aims to double its operating profit by 2029 compared to 2024 [1]