Investment Rating - The report maintains a "Buy" rating for the company [7] Core Views - The company demonstrated resilience in operations with a steady same-store sales growth and effective cost management, leading to a solid performance in Q3 2025 [1][2] Financial Performance - Q3 2025 revenue reached $3.2 billion, a year-over-year increase of 4%, while operating profit was $400 million, up 8% year-over-year, slightly exceeding Bloomberg consensus estimates [1] - The operating profit margin improved to 12.5%, reflecting a 0.4 percentage point increase year-over-year [1][2] - The net profit attributable to shareholders was $282 million, down 5% year-over-year, primarily due to a decline in Meituan's stock price; excluding investment losses, net profit increased by 7% year-over-year [1] Store Expansion and Brand Performance - The company added a record 536 new stores in Q3, with a total of 17,514 stores by the end of the quarter, including 12,640 KFC and 4,022 Pizza Hut locations [3] - The same-store sales growth for KFC was 2%, while Pizza Hut saw a 1% increase, with delivery sales growing by 32% year-over-year [2][3] Shareholder Returns - The company returned a total of $414 million to shareholders in Q3, with a total of $950 million returned in the first three quarters of 2025 [4] - The company plans to return approximately $1.5 billion to shareholders for the full year, maintaining guidance for $3 billion in shareholder returns for 2025-2026 [4] Profit Forecast and Valuation - The report adjusts the company's net profit forecasts for 2025-2027 to $908 million, $986 million, and $1.049 billion, respectively, reflecting a slight downward revision [5] - The target price is adjusted to HKD 413.59, corresponding to a 2026 PE ratio of 18 times [5]

Core Insights - The company achieved revenue of $2.8 billion in Q2 2025, a year-on-year increase of 4% [1] - Adjusted net profit reached $215 million, also up 1% year-on-year [1] - The core operating profit margin was 10.9%, reflecting a 1.0 percentage point increase year-on-year [1] Sales Performance - Same-store sales grew by 1% year-on-year, with KFC and Pizza Hut showing respective increases of 1% and 2% [1] - KFC's average transaction value increased by 1%, while transaction volume remained flat; the growth in average transaction value was driven by a higher proportion of high-value delivery sales, which rose by 25% [1] - Pizza Hut's average transaction value decreased by 13%, but transaction volume increased by 17%, attributed to new menu items and successful marketing campaigns [1] Store Expansion - The company opened a net of 336 new stores in Q2 2025, with KFC and Pizza Hut contributing 295 and 95 new locations, respectively [1] - The total number of restaurants reached 16,978, with KFC and Pizza Hut having 12,238 and 3,864 locations, respectively [1] - The company maintains its guidance of adding 1,600 to 1,800 new stores in 2025, with a faster opening pace expected in the second half of the year [1] Cost Management and Profitability - The restaurant profit margin improved to 16.1%, a year-on-year increase of 0.6 percentage points [2] - Food and packaging costs accounted for 31.0% of restaurant revenue, down 0.5 percentage points, benefiting from lower ingredient prices [2] - Labor costs increased to 27.2% of restaurant revenue, up 0.9 percentage points, primarily due to the growth in delivery services [2] New Initiatives - The company has raised its target for the number of KFC Coffee stores to 1,700 by the end of 2025, up from 1,500, due to better-than-expected progress [3] - The WOW store format for Pizza Hut has shown significant improvement in profitability and has expanded into over 10 new cities [3] - The company aims to enhance product offerings and increase contributions from KFC Coffee to overall performance [3] Financial Forecast - The company has revised its net profit forecasts for 2025-2027 down to $940 million, $1.002 billion, and $1.074 billion, reflecting decreases of 2%, 3%, and 3%, respectively [4] - The projected EPS for 2025-2027 is $2.55, $2.71, and $2.91, with corresponding PE ratios of 19x, 17x, and 16x [4] - The company remains a leading player in the Western fast-food sector, with strong digital and supply chain capabilities [4]

Investment Rating - The report maintains a "Buy" rating for Yum China (9987.HK) [1] Core Insights - In Q2 2025, the company achieved revenue of $2.8 billion, a year-on-year increase of 4%, and adjusted net profit of $215 million, also up 1% year-on-year [5][6] - Same-store sales turned positive for the first time since Q1 2024, with a 1% year-on-year increase, driven by a 5% increase in KFC and a 3% increase in Pizza Hut [6] - The company plans to accelerate store openings in the second half of 2025, targeting a net increase of 1,600 to 1,800 stores for the year [7] Revenue Performance - The company reported a same-store sales growth of 1% in Q2 2025, with KFC and Pizza Hut showing respective growth rates of 1% and 2% [6] - KFC's average ticket price increased by 1% year-on-year, while Pizza Hut's decreased by 13% due to a focus on more cost-effective products [6] Store Expansion - In Q2 2025, the company added 336 new stores, bringing the total to 16,978 [7] - The company has adjusted its capital expenditure guidance for 2025 to $600-700 million, down from $700-800 million [7] Profitability Improvement - The restaurant profit margin improved to 16.1% in Q2 2025, up 0.6 percentage points year-on-year [8] - The company expects stable profit margins for KFC and slight improvement for Pizza Hut in the second half of 2025 [8] Future Outlook - The company raised its target for the number of KFC coffee shops to 1,700 by the end of 2025, reflecting strong sales growth in new product categories [9] - The report projects adjusted net profit for 2025-2027 to be $940 million, $1.002 billion, and $1.074 billion respectively, with corresponding EPS of $2.55, $2.71, and $2.91 [10][11]