Investment Rating - The investment rating for the company is "Outperform" [1] Core Views - The company reported a revenue of $8.708 billion for the first three quarters of 2024, representing a year-on-year growth of 3% [4] - Adjusted net profit for the same period was $796 million, up 8% year-on-year [4] - In Q3 2024, revenue reached $3.071 billion, a 5% increase year-on-year, with adjusted net profit growing by 20% to $297 million [4] - The diluted EPS for Q3 2024 was $0.77, reflecting a 33% increase compared to the previous year [4] Revenue and Profitability - The company’s same-store sales improved sequentially, with overall sales growth of 4%, 6% for KFC, and 2% for Pizza Hut [4] - The same-store sales declined by 3%, 2%, and 6% for overall, KFC, and Pizza Hut respectively, indicating a recovery to approximately 88% of 2019 levels, an improvement of about 1 percentage point from Q2 [4] - KFC and Pizza Hut's order volumes increased by 1% and 4%, while average transaction prices decreased by 3% and 9% respectively [4] Store Expansion and Performance - As of Q3 2024, the total number of restaurants reached 15,861, with net additions of 1,189 stores in the first three quarters [4] - KFC had 11,283 stores, with net additions of 352 in Q3, while Pizza Hut had 3,606 stores, with 102 net additions [4] - The proportion of new stores in lower-tier cities was 58% for KFC and 60% for Pizza Hut, with franchise stores accounting for 27% and 7% respectively [4] Digitalization and Shareholder Returns - The company is advancing digitalization and delivery services, with over 510 million combined members for KFC and Pizza Hut, and member sales accounting for 64% of total sales [4] - Digital orders contributed $2.61 billion, representing 90% of restaurant revenue [4] - Delivery sales grew by 18% year-on-year, making up approximately 40% of restaurant revenue [4] - The shareholder return plan has been increased by 50%, targeting $4.5 billion from 2024 to 2026 [4] Cost Control and Efficiency - The company has successfully reduced costs, with employee costs, property rents, and other operating expenses decreasing as a percentage of restaurant revenue [4] - The cost of materials and consumables accounted for 31.7% of restaurant revenue, up 0.6 percentage points year-on-year [4] - Employee costs represented 25.1% of restaurant revenue, down 0.2 percentage points year-on-year [4] Financial Forecast and Valuation - The company is expected to achieve net profits of $901 million, $963 million, and $1.048 billion for 2024, 2025, and 2026 respectively, with growth rates of 8.9%, 6.9%, and 8.9% [4] - The estimated reasonable value range for the stock is between HKD 354.0 and HKD 432.7 per share based on a PE ratio of 18-22 times for 2025 [4]

Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive long-term outlook based on its fundamentals and growth strategies [2][3]. Core Insights - The company is expected to achieve revenue growth of 4.1%, 8.4%, and 8.2% for the years 2024, 2025, and 2026, respectively, with projected revenues of $11.43 billion, $12.38 billion, and $13.40 billion [3][4]. - Net profit is forecasted to grow by 10.2%, 8.5%, and 8.3% over the same period, reaching $911 million, $988 million, and $1.07 billion [3][4]. - The company has increased its dividend and share buyback program, raising the total planned amount from $3 billion to $4.5 billion, which represents 23% of its current market capitalization [3][4]. - The restaurant operating profit margins for KFC and Pizza Hut were reported at 18.3% and 12.8%, respectively, showing resilience in profitability [3][4]. - The company opened 438 new stores in Q3 2024, bringing the total to 15,861, with KFC and Pizza Hut showing year-on-year growth of 14% and 13% in store numbers [3][4]. Financial Summary - For the fiscal year 2023, the company reported revenues of $10.98 billion, with a year-on-year growth rate of 14.7% [4][7]. - The projected earnings per share (EPS) for 2024, 2025, and 2026 are $2.36, $2.63, and $2.92, respectively [3][4]. - The return on equity (ROE) is expected to be 12.8% in 2023, increasing to 13.5% in 2024 before slightly declining in subsequent years [7][4].

Investment Rating - The investment rating for the company is "Buy" with a target price of 446.3 HKD, indicating a potential upside of 16% from the current stock price of 387.8 HKD [1][2][3]. Core Insights - The company demonstrated resilience with a 5% year-over-year increase in total revenue to 3.07 billion USD in Q3, alongside a 4% increase in system sales. Core operating profit rose by 18%, and net profit increased by 22% to 297 million USD [2][3]. - The company has adjusted its net profit forecasts for 2024, 2025, and 2026 to 950 million, 980 million, and 1.09 billion USD respectively, with corresponding EPS estimates of 17.8, 18.3, and 20.5 HKD [2][3]. - The company has expanded its store count to 15,900, with a net addition of 438 stores in Q3, reflecting a 12.5% year-over-year growth [3]. Financial Performance Summary - Total revenue for 2023 is projected at 9.57 billion USD, with a growth rate of 14.72% expected in 2024, followed by 2.94% in 2025 and 8.87% in 2026 [5][14]. - Net profit for 2023 is estimated at 478 million USD, with a significant recovery projected in subsequent years, reaching 901 million USD in 2024 and 948 million USD in 2025 [5][14]. - The company maintains a gross margin of approximately 70%, with a net profit margin expected to stabilize around 8% in the coming years [5][15]. Valuation Analysis - The valuation methods employed include comparable company analysis and discounted cash flow (DCF) analysis, with a target price of 446.3 HKD derived from these methods, reflecting a 16.9% upside potential [7][9]. - The average PE ratio for comparable companies is projected at 18.8x for 2025, while the company is assigned a PE of 25x due to its market position and growth potential [7][9]. - The DCF analysis estimates a reasonable market value of 167.4 billion HKD, corresponding to a stock price of 434.3 HKD [7][11].

Investment Rating - The report maintains a "Buy" rating for Yum China (YUMC.US/9987.HK) with a target price of HKD 479.7 for the Hong Kong-listed shares and USD 61.5 for the US-listed shares [2][3] Core Views - Yum China's 3Q24 operating profit growth exceeded expectations due to cost reduction and efficiency improvements [2] - The company's flexible operational strategies and strong management capabilities are driving improved same-store sales and continued cost optimization [2] - Yum China plans to increase shareholder returns from USD 3 billion to USD 4.5 billion for 2024-2026, which is expected to boost market sentiment [2] Same-Store Sales Outlook - Same-store sales are expected to trend positively in 2025, with KFC likely to return to positive same-store sales growth and Pizza Hut narrowing its decline [2] - KFC's average check is expected to remain stable, while Pizza Hut's average check may face downward pressure due to the increasing proportion of WOW stores [2] Cost Optimization and Efficiency - Despite declining average checks, restaurant-level margins remained flat YoY in 3Q24, and operating margins expanded by 1.0ppt [2] - The company expects cost optimization efforts to continue, though the marginal benefits may weaken in 2025 [2] - Management aims to maintain the administrative expense ratio below 5% in the medium to long term [2] Franchise Expansion - Yum China plans to accelerate franchise development, with franchise stores expected to account for 40%-50% of KFC's net new openings and 20%-30% of Pizza Hut's net new openings [2] - The franchise model is seen as complementary to company-owned stores, helping to expand into new markets and regions [2] - Franchise stores are expected to achieve operating margins comparable to company-owned stores, with strict controls in place to ensure operational quality and food safety [2] Financial Performance and Forecasts - Revenue is projected to grow from USD 11,352 million in 2024E to USD 13,041 million in 2026E, with net income attributable to shareholders increasing from USD 919 million to USD 1,059 million over the same period [6] - The company's EV/EBITDA multiple is expected to decline from 9.9x in 2024E to 8.4x in 2026E, reflecting improved profitability and efficiency [6] Market Sentiment and Valuation - The report highlights a potential upside of 27.3% for Yum China's US-listed shares and 24.3% for its Hong Kong-listed shares based on the target prices [3][4] - The company's market capitalization stands at USD 8,386 million, with a 3-month average daily trading volume of USD 144.9 million [3]

Investment Rating - The report maintains a "Buy" rating for Yum China, indicating a positive outlook for the company's stock performance [5]. Core Views - Yum China demonstrated strong operational efficiency and cost control, with a Q3 restaurant profit margin of 17%, stable year-on-year [2]. - The company plans to increase its shareholder return by 50% from $3 billion to $4.5 billion for the years 2024-2026, with a target of returning $1.5 billion to shareholders in 2024 [4]. - The company is focusing on expanding its franchise model, aiming to increase the proportion of franchise stores from 15-20% to 40-50% in the coming years [3]. Financial Performance - In Q3 2024, Yum China reported revenues of $3.07 billion, a year-on-year increase of 5%, with a system sales growth of 4% [1]. - The operating profit for Q3 was $371 million, reflecting a year-on-year increase of 15%, with an operating profit margin of 12.1% [1]. - The GAAP net profit attributable to shareholders was $297 million, up 22% year-on-year, while the Non-GAAP net profit also stood at $297 million, marking a 20% increase [1]. Store Expansion and Market Strategy - The company opened 438 new stores in Q3, with 145 being franchise stores, representing 33% of the new openings [3]. - As of Q3 2024, Yum China had a total of 15,861 stores, with KFC and Pizza Hut accounting for 11,283 and 3,606 stores, respectively [3]. - The company is leveraging favorable raw material prices and operational efficiency projects to maintain stable profit margins despite pressures on same-store sales [2]. Earnings Forecast - The forecast for net profit attributable to shareholders for FY2024-2026 is $902 million, $978 million, and $1.05 billion, respectively, with corresponding EPS of $2.37, $2.57, and $2.76 [4][9]. - The report projects a P/E ratio of 21, 19, and 18 for FY2024, FY2025, and FY2026, respectively, based on the closing price on November 5 [4][9].

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股 票 研 究 海 外 公 司 （ 中 国 香 港 ） 证 券 研 究 报 告 国泰君安版权所有发送给上海东方财富金融数据服务有限公司.东财接收研报邮箱.ybjieshou@eastmoney.com p1 股票研究 /[Table_Date] 2024.11.05 运营效率持续优化，提高股东回报 百胜中国(9987) [Table_Industry] 社会服务业 [Table_Invest] 评级： 增持 ——百胜中国 2024Q3 业绩点评 | --- | --- | --- | |----------|-------------------------------------|-----------------------------| | | | | | | [table_Authors] 刘越男 ( 分析师 ) | 宋小寒 ( 分析师 ) | | | 021-38677706 | 010-83939087 | | | liuyuenan@gtjas.com | songxiaohan026736@gtjas.com | | 登记编号 | S0880516030003 | S0880524080011 ...

Investment Rating - The report maintains a "Buy" rating for the company, expecting a price increase of over 15% in the next 6-12 months [6]. Core Insights - The company reported Q3 total revenue of $3.07 billion, a 5% increase year-over-year, with core operating profit rising by 18% to $369 million [2]. - The company plans to increase the proportion of franchise stores, aiming for 40-50% for KFC and 20-30% for Pizza Hut in the coming years [2]. - KFC's same-store sales decline has narrowed, with a 6% increase in system sales at constant exchange rates [2]. - Pizza Hut's same-store sales also showed improvement, with a 2% increase in system sales at constant exchange rates [2]. - The company plans to enhance shareholder returns to $4.5 billion from 2024 to 2026, a 50% increase from previous plans [2]. Financial Performance Summary - Q3 revenue was $3.07 billion, with a 5% increase year-over-year, and core operating profit reached $369 million, an 18% increase [2]. - KFC's same-store sales decreased by 2%, while system sales increased by 6% at constant exchange rates [2]. - Pizza Hut's same-store sales decreased by 6%, with system sales increasing by 2% at constant exchange rates [2]. - The company reported a net increase of 438 stores in Q3, with 145 of those being franchise stores, representing 33% of the total [2]. - The company has a strong cash flow with $3.15 billion in net cash as of the end of Q3 [2]. Earnings Forecast and Valuation - The forecast for net profit attributable to shareholders is $920 million, $1.01 billion, and $1.09 billion for 2024E, 2025E, and 2026E respectively, representing year-over-year growth rates of 10.8%, 10.4%, and 7.5% [2]. - The expected P/E ratios for 2024E, 2025E, and 2026E are 18.9, 17.5, and 16.2 respectively [2].

Summary of Yum! China 3rd Quarter 2024 Earnings Conference Call Company Overview - **Company**: Yum! China - **Quarter**: 3rd Quarter 2024 Key Industry Insights - **Industry**: Fast Food and Restaurant Sector in China - **Market Dynamics**: The restaurant industry continues to grow, with global players investing aggressively in the Chinese market. There is a trend of rationalizing promotional intensity among competitors, and some aggressive players are slowing down store openings [16][19]. Core Financial Performance - **System Sales Growth**: Grew by 4% year-over-year [2][8]. - **Same-Store Sales Index**: Improved to 97% of the prior year's level [1][8]. - **Delivery Sales**: Achieved double-digit growth for 10 consecutive years, with delivery sales reaching around 40% of the sales mix in Q3 [2][4]. - **Operating Profit**: Grew by 18% year-over-year, with diluted EPS increasing by 32% [2][8]. - **Revenue**: $8.7 billion in the first nine months, with over $1 billion in operating profit [2][5]. - **Net Income**: $297 million, growing 21% year-over-year [10]. Strategic Initiatives - **RGM 2.0 Strategy**: Focus on operational efficiency and innovation, leading to improved margins and customer satisfaction [2][3]. - **Project FreshEye and Project RedEye**: Aimed at enhancing operational efficiency through process evaluation and innovative technology [3][4]. - **Store Expansion**: Opened 438 net new stores in Q3, totaling over 1,200 new stores year-to-date, on track to meet the target of 1,500 to 1,700 new stores for the year [6][12]. Brand Performance KFC - **System Sales Growth**: Increased by 6% year-over-year [8]. - **Same-Store Sales**: Reached 98% of prior year levels with a 1% same-store transaction growth [8]. - **New Product Innovations**: Successful introduction of new items like the original recipe chicken burger and curry gravy chicken [4][5]. - **Franchise Development**: Currently, franchisees represent 12% of KFC's store portfolio, with plans to increase this to 40-50% over the next few years [7][17]. Pizza Hut - **System Sales Growth**: Increased by 2% year-over-year [8]. - **Same-Store Sales**: At 94% of prior year levels, with a 4% same-store transaction growth [8]. - **New Store Formats**: Introduction of the Pizza Hut WOW model, which has shown promising initial results [6][20]. - **Durian Pizza Success**: Durian pizza has become the number one best-selling pizza, with nearly 30 million sold year-to-date [5][6]. Capital Return Strategy - **Shareholder Returns**: Over $1.2 billion returned to shareholders in the first nine months, including $1 billion in share repurchases [10][11]. - **Future Plans**: Aiming to increase capital returns to $4.5 billion from 2024 to 2026, up from the previous target of $3 billion [11][12]. Operational Efficiency and Cost Management - **Cost of Sales**: Remained stable at 31.7%, with favorable commodity prices contributing to cost management [9][10]. - **Labor Costs**: Decreased to 25.1%, with improved operational efficiency offsetting wage increases [9][10]. - **Marketing and Advertising Expenses**: Decreased by 19% year-over-year, reflecting operational efficiency gains [10]. Consumer Trends and Market Outlook - **Consumer Behavior**: Consumers are becoming more rational and value-conscious, seeking good quality and emotional value [3][4]. - **Market Conditions**: Despite recent stimulus policies, no significant changes in market conditions or consumer sentiment have been observed entering Q4 [11][19]. - **Q4 Expectations**: Traditionally a low season, with expectations of smaller sales and profits, but confidence remains in capturing consumer needs through strategic initiatives [11][19]. Conclusion - **Key Messages**: 1. Resiliency and growth strategy highlighted by strong Q3 results. 2. Continued optimism for long-term growth opportunities in China. 3. Commitment to sustainable growth and increased capital returns to shareholders [12].

Thank you for standing by and welcome to the Yum! China 3rd Quarter 2024 Earnings Conference Call. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Florence Lip, Senior IR Director. Please go ahead. Thank you, Operator. Hello, everyone. Thank you for joining YoungChina's third q ...