Why Yum China Stock Soared 33% Last Month

Core Viewpoint - Yum China Holdings experienced a significant stock price increase of 33.2% in September, reflecting a broader trend of rising stock prices among companies operating in China, driven by a cut in interest rates aimed at stimulating economic growth [1][2]. Company Performance - Yum China's same-store sales declined by 3% year over year in the first half of 2024, but overall sales increased due to a rapid expansion of new restaurant openings [3][4]. - The company's second-quarter operating profit reached $266 million, marking the highest profit since its spin-off from Yum! Brands in 2016 [3]. Growth Prospects - Yum China plans to open between 1,500 and 1,700 new locations in 2024, indicating a strong growth trajectory [5]. - The company's operating margin is approximately 10%, which is considered robust for the restaurant industry [5]. Shareholder Returns - Management is returning $1.5 billion to shareholders this year through dividends and share buybacks, which is a substantial amount for a company of its size [5]. Valuation - Yum China stock is currently trading at about 24 times earnings, which is viewed as fairly valued, suggesting potential for long-term growth if the company continues to expand and generate profits [5].