Core Viewpoint - Guosen Securities maintains an "outperform" rating for Yum China (09987), adjusting the net profit forecast for 2025-2027 to $9.27/9.93/10.66 billion, with a slight decrease of -2.0% for 2025 and no change for the following years, while EPS is projected at $2.62/2.95/3.30 [1] Financial Performance - In Q3 2025, the company achieved revenue of $3.206 billion, a year-on-year increase of 4.4%, and operating profit of $400 million, up 7.8% year-on-year, driven by improved restaurant operational efficiency; however, net profit attributable to shareholders was $282 million, down 5.1% due to pre-tax investment losses of approximately $10 million [1] - KFC division generated revenue of $2.404 billion, up 4.0% year-on-year, with operating profit of $384 million, a 5.5% increase; operating margin was 16.0%, up 0.2 percentage points [2] - Pizza Hut division reported revenue of $635 million, a 3.3% increase, with operating profit of $57 million, up 9.6%; operating margin was 8.9%, an increase of 0.4 percentage points [2] Same-Store Sales Growth - In Q3 2025, system sales increased by 4%, with KFC and Pizza Hut growing by 5% and 4% respectively; overall same-store sales grew by 1%, maintaining resilient growth [3] - KFC's transaction volume increased by 3% year-on-year, while average transaction value decreased by 1%; Pizza Hut's average transaction value continued to decline, but transaction volume increased by 17% [3] Store Expansion - In Q3 2025, the company added 536 new stores, with a total of 1,119 new stores added in the first three quarters, maintaining a target of 1,600-1,800 new stores for the year; total store count reached 17,514 [4] - The franchise ratio for KFC and Pizza Hut reached 41% and 28% respectively, indicating a continued increase in franchise operations [4] - By the end of Q3 2025, the total number of group members reached 575 million, with member sales accounting for 57% of total sales [4] Operational Efficiency - In Q3 2025, salary and employee benefits accounted for 26.2% of total costs, up 1.1 percentage points; food costs accounted for 31.3%, down 0.4 percentage points; property rent accounted for 25.2%, down 1.0 percentage points; management fee rate was 4.7%, down 0.3 percentage points, indicating continuous improvement in efficiency [5] Innovation and Shareholder Returns - The number of K Coffee stores has exceeded 1,800, surpassing initial guidance, and the new K Pro store-in-store concept has expanded to 100 locations [6] - The target for shareholder returns in 2025 is set at $1.5 billion, with dividends and buybacks progressing steadily [6]