Core Viewpoint - Yum China reported Q2 2025 earnings with total revenue of $2.79 billion, a 4% increase excluding currency effects, meeting market expectations [1] - The company aims to accelerate store openings in the second half of the year, with a target of 1,600 to 1,800 new stores for the year [2] Financial Performance - Q2 adjusted operating profit was $304 million, a 14% increase excluding currency effects, surpassing market expectations of $288 million [1] - Adjusted net profit for Q2 was $220 million, a 1% increase excluding currency effects, also exceeding market expectations of $208 million [1] - Q2 same-store sales growth was 1%, with KFC at 1% and Pizza Hut at 2% [1] Cost Structure - In Q2, food cost accounted for 31% of total costs, a decrease of 0.5 percentage points; labor cost accounted for 27%, an increase of 0.9 percentage points [1] - Restaurant profit margin for Q2 was 16.1%, an increase of 0.6 percentage points, with KFC at 16.9% and Pizza Hut at 13.3% [1] Store Expansion - The company opened a net of 336 stores in Q2, with KFC opening 295 and Pizza Hut 95 [2] - As of Q2 2025, the total number of stores reached 16,978, with KFC at 12,238 and Pizza Hut at 3,864 [2] Shareholder Returns - The company committed to returning at least $1.2 billion to shareholders this year, with a shareholder return rate of 7% [2] - In H1 2025, the company returned $536 million to shareholders, including $180 million in cash dividends and $356 million in share buybacks [2] Future Outlook - The company is expected to achieve a net profit of $950 million, $980 million, and $1.03 billion for 2025, 2026, and 2027 respectively, with corresponding P/E ratios of 18.5, 17.7, and 17.0 [3] - The company is positioned as a benchmark for localized Western fast food, with a strong focus on expanding into lower-tier markets [2]

Investment Rating - The report maintains a "Buy" rating for the company, indicating a projected stock price increase of over 15% within the next six months [6]. Core Insights - The company reported Q2 2025 total revenue of $2.79 billion, a 4% increase excluding currency effects, which aligns with market expectations. Adjusted operating profit reached $304 million, up 14% compared to market expectations of $288 million [1][2]. - Same-store sales growth turned positive for the first time since Q1 2024, with system sales growth of 4% in Q2, driven by KFC and Pizza Hut's respective growth rates of 5% and 3% [2]. - The company opened a net of 336 new stores in Q2, with a total of 16,978 stores as of Q2 2025, and aims to open 1,600 to 1,800 stores by the end of the year [3]. Financial Summary - The company committed to returning at least $1.2 billion to shareholders this year, with a shareholder return rate of approximately 7%. In H1 2025, the company returned $536 million to shareholders, including $180 million in cash dividends and $356 million in share buybacks [3]. - Revenue projections for 2025-2027 are $11.68 billion, $12.20 billion, and $12.73 billion, respectively, with corresponding net profits of $946 million, $984 million, and $1.03 billion [5][14]. - The company’s net profit margin is projected to remain stable at around 8.1% for the next few years, with a return on equity (ROE) forecasted to decline from 15.9% in 2024 to 11.8% in 2027 [14][15]. Store Expansion and Strategy - The company is focusing on expanding its store network, particularly in lower-tier markets, with a strong performance in same-store sales indicating a recovery trend in the restaurant industry [4]. - The strategy includes leveraging delivery services, which accounted for approximately 45% of revenue in Q2, showing a year-on-year growth of 22% [3][4]. Valuation Metrics - The projected price-to-earnings (P/E) ratios for 2025, 2026, and 2027 are 18.5, 17.7, and 17.0, respectively, indicating a favorable valuation compared to historical performance [4][5].