Investment Rating - The investment rating for the company is "Buy" and is maintained [2] Core Views - The company achieved a total revenue of $2.68 billion in Q2 2024, a year-on-year increase of 1%, with operating profit reaching $266 million, up 4% year-on-year, both setting new records for Q2 [1] - The company continues to expand its store network, with a total of 15,423 stores as of June 30, 2024, including 10,931 KFC and 3,504 Pizza Hut locations [1] - System sales increased by 4% year-on-year in Q2 2024, driven by an 8% contribution from net new stores [1] - Same-store sales have declined for two consecutive quarters, with Q2 2024 showing a decrease of 4% overall, 3% for KFC, and 8% for Pizza Hut [1] - The company reported a significant increase in delivery sales, which grew by 11% year-on-year, with digital orders accounting for 90% of restaurant revenue [1] - The company is focused on optimizing its menu and processes, leveraging automation and AI technology to enhance operational efficiency [1] - The management has committed to returning approximately $2.49 billion to shareholders in Q2 2024 through stock buybacks and cash dividends, with a total of nearly $1 billion returned year-to-date [1] Financial Summary - The company projects revenues of $11.15 billion, $12.00 billion, and $13.00 billion for 2024, 2025, and 2026 respectively, with net profits of $847 million, $917 million, and $1.007 billion for the same years [3][4] - The current price-to-earnings (P/E) ratios are projected to be 15x, 14x, and 13x for 2024, 2025, and 2026 respectively [1][4] - The company has a total market capitalization of approximately HKD 101.38 billion [2]

A recommendation upgrade from an analyst put the cap on an encouraging quarterly earnings report.Economic growth in China might not be what it once was, but certain imported businesses aren't doing too badly. Case in point: restaurateur Yum China Holdings (YUMC 0.80%), which recently posted quarterly earnings that cheered investors. They also inspired one analyst to upgrade her recommendation on the stock, helping to propel it to a nearly 16% week-to-date gain as of early Friday morning, according to data c ...

Financial Performance - Total revenue grew by 1% to $5.64 billion, or 5% excluding foreign currency translation effects[1] - Net profit attributable to Yum China Holdings, Inc. was $499 million, up from $486 million in the prior year[6] - Net profit for the six months ended June 30, 2024, was $535 million, compared to $527 million in the same period of 2023, reflecting a year-over-year increase of 1.5%[8] - Comprehensive income, including non-controlling interests, was $424 million, compared to $282 million in the previous year[7] - Diluted earnings per share rose by 10% to $1.26, or 14% excluding foreign currency translation effects[2] - The company reported a significant operating profit margin, with total costs and expenses netting $4.390 billion, resulting in an operating profit of $1.244 billion[60] - The effective tax rate for the six months ended June 30, 2024, was 26.2%, a decrease from 27.0% in 2023, primarily due to a reduction in non-deductible items[51] - The actual tax rate for the six months ended June 30, 2024, was 26.2%, slightly lower than 27.0% in the same period of 2023[100] Store Operations - System sales increased by 5% year-over-year, driven by an 8% contribution from net new store openings, partially offset by a decline in same-store sales[1] - The total number of stores reached 15,423, with 10,931 KFC and 3,504 Pizza Hut locations, adding a net of 779 stores during the period[1] - Same-store sales reached 97% of the prior year's level, despite strong performance in the same period last year[1] - The company plans to open approximately 1,500 to 1,700 new stores in fiscal year 2024[78] - The number of self-operated restaurants increased by 13% to 13,278 from 11,747 year-over-year[77] Shareholder Returns - Yum China returned nearly $1 billion to shareholders through stock buybacks and cash dividends, exceeding the total for the entire year of 2023[2] - The company paid a cash dividend of $0.26 per share for the fiscal year ending December 31, 2023[10] - The estimated cash dividend of $0.16 per share for Yum China common stock totals approximately $61 million, payable on September 17, 2024[59] - The board authorized an increase in the stock repurchase program by $1 billion, totaling $3.4 billion[111] Cash Flow and Liquidity - Cash generated from operating activities for the six months ended June 30, 2024, was $843 million, down from $924 million in the same period of 2023, representing a decrease of 8.8%[8] - Cash and cash equivalents decreased to $1,043 million as of June 30, 2024, from $1,128 million as of December 31, 2023, a decline of 7.5%[9] - The total cash and cash equivalents reported as of June 30, 2024, is $1.305 billion, indicating a strong liquidity position[61] Capital Expenditures and Investments - The company reported a capital expenditure of $358 million for the six months ended June 30, 2024, compared to $332 million in the same period of 2023, reflecting an increase of 7.8%[8] - Capital expenditures for the fiscal year 2024 are expected to range between $700 million and $850 million[110] - The company completed the acquisition of a 28% stake in Hangzhou Beverage for $255 million, gaining control of Hangzhou KFC with approximately 60% ownership[15] Debt and Liabilities - Total liabilities increased to $5,086 million as of June 30, 2024, compared to $4,912 million as of December 31, 2023, marking an increase of 3.5%[9] - The company reported short-term bank borrowings of $416 million as of June 30, 2024, significantly up from $168 million as of December 31, 2023[39] - The company's debt-to-equity ratio was 6.4% as of June 30, 2024, compared to 2.4% as of December 31, 2023[115] Revenue Breakdown - Company restaurant revenue for KFC was $4,120 million and for Pizza Hut was $1,137 million, totaling $5,289 million[25] - The company reported revenue from external customers for KFC at $4,244 million and for Pizza Hut at $1,135 million for the six months ended June 30, 2024, totaling $5,637 million[54] - Franchise fee income amounted to $46 million, with KFC contributing $32 million and Pizza Hut $4 million[25] Operational Efficiency - The company has a centralized procurement system for most food and packaging materials, which enhances operational efficiency and revenue generation[22] - The company recognized unrealized gains from its investment in Meituan of $16 million for the six months ended June 30, 2024, compared to a loss of $29 million for the same period in 2023[18] Tax and Regulatory Matters - The company continues to monitor regulatory developments related to the Corporate Alternative Minimum Tax (CAMT) and its potential impact on financial statements[51] - The company is undergoing a tax audit by Chinese tax authorities regarding transfer pricing arrangements, which may have a significant adverse impact on its financial condition and cash flow if additional taxes are assessed[105] Market Position and Strategy - Yum China Holdings, Inc. operates 15,423 restaurants across over 2,100 cities in China as of June 30, 2024, making it the largest restaurant company in the country by system sales[70] - KFC is the leading fast-food brand in China, with 10,931 restaurants operating in over 2,100 cities as of June 30, 2024[70] - The company believes there are significant further expansion opportunities within China, focusing on both existing and new cities[70] Impairment and Asset Management - The company recognized impairment charges of $7 million for restaurant-level assets for the six months ended June 30, 2024, compared to $14 million for the same period in 2023[50] - The company utilizes a two-step impairment loss measurement for long-term assets under US GAAP, which may differ from the one-step approach under IFRS[68]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _________________ Commission file number 001-37762 Yum China Holdings, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 81 ...

Investment Rating - The investment rating for Yum China (09987) is "Buy" [5] Core Views - The company achieved a net profit of $212 million in Q2 2024, exceeding expectations, with total revenue of $2.679 billion, a year-on-year increase of 1% [1] - The growth in revenue is primarily driven by a rapid increase in new store openings, with a total store count growing by 13% year-on-year [1] - Cost reduction and efficiency improvements have significantly contributed to profit growth, with the profit margin for Pizza Hut restaurants increasing by nearly 1 percentage point [2] - The company maintains its commitment to a $1.5 billion shareholder return for the year, having completed nearly $1 billion in the first half of 2024 [1] Summary by Sections Financial Performance - In Q2 2024, the company reported operating income of $266 million, a year-on-year increase of 4%, and a net profit of $212 million, up 8% year-on-year [1] - Revenue growth is attributed to new store openings and effective cost management, with overall management expense ratio improving by approximately 1 percentage point [2] Store Expansion - The company continues its expansion trend, with KFC and Pizza Hut store counts increasing by 14% year-on-year [3] - The company aims to open 1,500 to 1,700 new stores within the year, with a focus on innovative store formats like KFC Coffee and Pizza Hut's "Wow" stores [3] Profit Forecast and Valuation - Yum China is projected to achieve revenues of $11.332 billion, $12.316 billion, and $13.251 billion from 2024 to 2026, with year-on-year growth rates of 3%, 9%, and 8% respectively [4] - The net profit forecast for the same period is $852 million, $940 million, and $1.019 billion, with corresponding year-on-year growth rates of 3%, 10%, and 8% [4] - The company is expected to maintain a price-to-earnings ratio (P/E) of 15x, 14x, and 13x for the years 2024, 2025, and 2026 respectively [4]

Investment Rating - The report maintains a "Buy" rating for Yum China (09987 HK) [1][3] Core Views - Yum China achieved record-high revenue in Q2 2024 with refined cost management driving profit growth [1] - The company's digital transformation continues to progress with digital orders accounting for 90% of restaurant revenue in H1 2024 [1] - Yum China has returned $994 million to shareholders through buybacks and dividends year-to-date exceeding the full-year 2023 amount [1] Financial Performance Revenue and Profit - Q2 2024 revenue reached $2 68 billion up 0 94% YoY (4% excluding currency impact) [1] - Operating profit grew 3 50% YoY to $266 million (7% excluding currency impact) [1] - Net profit increased 7 61% YoY to $212 million (11% excluding currency impact) [1] Segment Performance KFC - Q2 2024 revenue reached $2 014 billion up 1 5% YoY (5% excluding currency impact) [1] - Operating profit declined 3 3% YoY to $264 million while core operating profit grew 3 8% to $273 million [1] - Restaurant margin was 16 2% down 1 1 percentage points YoY [1] Pizza Hut - Q2 2024 revenue was $540 million down 2 5% YoY (1% excluding currency impact) [1] - Operating profit increased 13% YoY to $40 million (18% excluding currency impact) [1] - Restaurant margin improved to 13 2% up 0 8 percentage points YoY [1] Store Expansion - Total store count reached 10 931 for KFC and 3 504 for Pizza Hut as of H1 2024 [1] - Net new store additions were 328 for KFC and 79 for Pizza Hut in Q2 2024 [1] Digital Transformation - Digital order revenue reached $2 2 billion in H1 2024 accounting for 90% of restaurant revenue [1] - Combined membership for KFC and Pizza Hut exceeded 495 million with member sales accounting for 65% of system sales [1] Financial Projections - 2024-2026 revenue is projected to grow at a CAGR of 9% reaching $13 787 billion by 2026 [2] - Net profit is expected to grow at a CAGR of 14% reaching $1 066 billion by 2026 [2] - EPS is forecasted to increase from $2 13 in 2024 to $2 77 in 2026 [2] Valuation - Current P E ratios are 16x for 2024 15x for 2025 and 12x for 2026 [1] - P B ratios are projected to decline from 1 9x in 2024 to 1 6x in 2026 [2]

7 Aug 2024 CMB International Global Markets | Equity Research | Company Update Yum China (YUMC US) The best-in-class costs management in 2Q24 Sales growth was indeed a miss in 2Q24, but the net profit was a significant beat. For 2H24E, we are still very cautious about the demand and so as the level of competition. However, thanks to various efforts like Project Fresh Eye, Project Red Eye, rationalizing number of SKUs, more direct sourcing, and rampup of more profitable store formats (e.g. K-coffee and Pizza ...

Financial Data and Key Metrics Changes - In Q2, the company reported revenue of $2.68 billion, with system sales growing by 4% year-over-year despite a high base from the previous year [9][25] - Core operating profit increased by 12% to $266 million, with a record operating margin of 9.9% [9][11] - Diluted earnings per share rose by 19% to $0.55 [11][25] Business Line Data and Key Metrics Changes - KFC system sales grew by 5% year-over-year, with same-store sales at 97% of last year's level and a 4% increase in customer traffic [10][11] - Pizza Hut system sales increased by 1%, with same-store sales at 92% of last year's level and a 2% increase in customer traffic [10][11] - Delivery sales for KFC grew by 12%, while Pizza Hut's delivery sales also maintained a strong performance [10][25] Market Data and Key Metrics Changes - The company opened a record 779 new stores in the first half of the year, bringing the total to 15,423 stores [11][25] - The company achieved a net new store count of 401 in Q2, with 25% being franchise stores [25] - Delivery revenue has seen double-digit growth over the past decade, with a 11% increase in Q2 [25] Company Strategy and Development Direction - The company is focusing on operational efficiency improvements and cost-saving measures, including the "Fresh Eye" and "Red Eye" projects [2][11] - New business models such as K-Coffee and Pizza Hut WOW stores are being expanded, with plans to increase K-Coffee locations to 500-600 by year-end [3][4][11] - The company aims to maintain a balance between system sales growth and same-store sales growth, particularly in lower-tier cities [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging market environment but expressed confidence in the company's ability to adapt and thrive [11][20] - The company expects to continue investing in product upgrades and marketing innovations to drive transaction growth [11] - There is a cautious outlook for the second half of the year, with management advising analysts to maintain a conservative stance [20] Other Important Information - The company returned nearly $1 billion to shareholders in the first half of the year, including a stock buyback of 21.7 million shares [11][25] - The company has a strong cash position with $3.1 billion in net cash at the end of Q2 [11][25] Q&A Session Summary Question: Can you provide more details on the economic aspects of the new business models like K-Coffee? - Management highlighted that K-Coffee has its own menu and operates with shared kitchens, allowing for competitive pricing and healthy net profits [12][13] Question: How do you view same-store sales trends going into Q4? - Management noted that lower-tier cities are recovering faster than higher-tier cities, and they expect to see continued growth in customer traffic [14] Question: What are the drivers behind the recent improvements in profit margins? - Management attributed margin improvements to direct sourcing from producers and the introduction of automation in operations [15][16] Question: Will new stores follow the Pizza Hut WOW model? - Management confirmed that they are testing the WOW model across various locations and will consider new openings based on the results [17][18] Question: How will pricing strategies be adjusted in the current environment? - Management indicated a balanced approach to pricing, focusing on value and expanding the price range to drive traffic [21][22] Question: What is the strategy regarding small businesses within the portfolio? - Management is reviewing small business operations and may reduce production and procurement of certain products as the market stabilizes [23][24]

Investment Rating - The report maintains a "Buy" rating for Yum China (9987.HK) [4] Core Insights - The company reported a strong profit performance in Q2 2024, with revenue of $2.679 billion, a year-over-year increase of 1% (4% excluding currency effects) [2] - Operating profit reached $266 million, up 4% year-over-year, with an operating margin of 9.9%, reflecting a 0.2 percentage point increase [2] - The company is focusing on improving operational efficiency and optimizing store formats, which has led to better-than-expected profit performance despite slight revenue pressure [2][3] Summary by Sections Financial Performance - Q2 revenue was $2.679 billion, with a year-over-year growth of 1% (4% excluding currency effects) [2] - Operating profit was $266 million, a 4% increase year-over-year, with an operating margin of 9.9% [2] - Net profit for Q2 was $212 million, an 8% increase year-over-year, with a net margin of 7.9% [2] Operational Efficiency - The company has improved its cost control, with a restaurant operating profit margin of 15.5% in Q2 [2] - KFC's operating profit margin was 16.2%, while Pizza Hut's was 13.2%, showing varied performance across brands [2] - The company is implementing projects like "Fresh Eye" and "Red Eye" to optimize operational processes and reduce labor costs [2] Same-Store Sales and Growth Initiatives - Same-store sales decreased by 4%, with KFC down 3% and Pizza Hut down 8% [3] - The company is launching new store formats like K COFFEE and WOW to drive same-store growth [3] - A total of 401 new restaurants were opened in Q2, with a plan to add 1,500-1,700 new stores throughout the year [3] Shareholder Returns - The company returned $249 million to shareholders in Q2 through buybacks and cash dividends, with a total of $994 million returned year-to-date [3] - The annual shareholder return target is $1.5 billion, with 66% of this target already achieved [3] Future Projections - Projected net profits for 2024-2026 are $878 million, $968 million, and $1.053 billion, respectively [4] - Expected EPS for the same period is $2.28, $2.51, and $2.73, with corresponding P/E ratios of 14, 13, and 12 [4]

Investment Rating - The report maintains a rating of "Buy" for Yum China (9987) [2][3] Core Views - Despite a slight decline in same-store sales, the company's cost control exceeded expectations, indicating strong operational management capabilities. The company is expected to provide high returns to shareholders through dividends and buybacks [3] Summary by Sections Financial Performance - For Q2 2024, total revenue reached $2.68 billion, reflecting a 1% increase (4% excluding currency effects). Operating profit was $266 million, up 4% (7% excluding currency effects), and net profit was $212 million, up 8% (11% excluding currency effects). Adjusted net profit was $266 million, up 3% (6% excluding currency effects) [3] - The company plans to return $3 billion to shareholders through dividends and buybacks from 2024 to 2026. Expected EPS for 2024-2026 are $2.16 (-0.08), $2.45 (-0.04), and $2.71 (-0.01), representing year-on-year growth of 8%, 14%, and 10% respectively [3] Store Expansion and Sales - As of H1 2024, the total number of stores reached 15,423, a 13% year-on-year increase. In Q2 2024, 401 new stores were added, with 99 being franchise stores, accounting for 25% of the new openings. KFC added 328 new stores, totaling 10,931, a 14% year-on-year increase, while Pizza Hut added 79 new stores, totaling 3,504, also a 14% increase [3] - Same-store sales experienced a year-on-year decline of 4% in Q2 2024, with KFC down 3% and Pizza Hut down 8%. This performance is at 86.7% of the same period in 2019 [3] Operational Efficiency - The restaurant profit margin for Q2 2024 was 15.5%, up 0.6 percentage points year-on-year. KFC's profit margin was 16.2%, down 1.1 percentage points, while Pizza Hut's profit margin was 13.2%, up 0.8 percentage points. The improvement in Pizza Hut's margin was primarily due to enhanced operational efficiency [3] - Menu innovations and streamlined processes have contributed to improved operational efficiency, with new products like the Pizza Dough Burger performing well. The company is also piloting new store formats to enhance customer experience [3]