Guosen Securities has issued a research report stating that, considering same-store sales have demonstrated resilient growth for three consecutive quarters, it has raised its net profit attributable to parent company forecasts for YUM CHINA (09987) for 2026-2027 to USD 1.019 billion and USD 1.106 billion, respectively, representing adjustments of +2.6% and +3.8%. Additionally, a new forecast for 2028 net profit was introduced at USD 1.170 billion, corresponding to PE valuations of 17.4x, 15.2x, and 13.8x for those years. The company's expansion plan is deemed steady. With future drivers including delivery services and format/product innovation, same-store sales are expected to continue showing alpha improvement. Steadily progressing shareholder returns also contribute additional positive aspects, leading the firm to maintain its "Outperform" rating on the company.
Key points from Guosen Securities are as follows:
Net profit attributable to the parent company increased by 22% year-on-year in the fourth quarter of 2025. In Q4 2025, the company achieved revenue of USD 2.823 billion, an increase of 8.8% year-on-year. Operating profit reached USD 187 million, up 23.8% year-on-year. Net profit attributable to the parent company was USD 140 million, a rise of 21.7% year-on-year. EPS was USD 0.40. By brand, in Q4 2025, the KFC division revenue was USD 2.125 billion, up 8.75% year-on-year; operating profit was USD 223 million, an increase of 16.1% year-on-year; the operating profit margin was 10.5%, up 0.7 percentage points. The Pizza Hut division revenue was USD 540 million, up 5.9% year-on-year; operating profit was USD 20 million, a significant increase of 42.9% year-on-year; the operating profit margin was 3.7%, up 1.0 percentage points year-on-year. By channel, delivery revenue grew 34% year-on-year, with the growth rate accelerating sequentially; the proportion of delivery revenue to total restaurant sales has reached 53%.
Core brands continue to show resilient same-store sales growth. In Q4 2025, system sales grew 7% year-on-year, with KFC and Pizza Hut increasing by 8% and 6%, respectively. Overall same-store sales grew 3% year-on-year, maintaining positive growth for three consecutive quarters. By brand, KFC and Pizza Hut same-store sales grew 3% and 1% year-on-year, respectively. For KFC, transaction volume/average ticket size increased by 3%/0% year-on-year. Pizza Hut implemented a value-for-money product strategy, leading to a continued year-on-year decrease in average ticket size, while transaction volume recovered well, increasing by 13% year-on-year. Looking ahead to 2026, the institution believes the company's same-store sales are expected to be stable to slightly increasing (company guidance: 0-2% growth), with continuous transaction volume improvement being the core driver.
Net store additions in Q4 2025 were 587, with the franchise proportion continuing to rise. By the end of 2025, the total number of stores reached 18,101, with KFC and Pizza Hut accounting for 12,997 and 4,168 stores, respectively. In Q4 2025, the company added a net 587 stores in the quarter, with KFC and Pizza Hut adding a net 357 and 146 stores, respectively. By the end of 2025, the proportion of franchised stores for KFC and Pizza Hut reached 15% and 8%, respectively.
Rising labor costs due to increased delivery mix, but restaurant-level margin performance remains strong. In Q4 2025, salaries and employee benefits accounted for approximately 29.3% of revenue, up 1.1 percentage points year-on-year, primarily influenced by increased delivery rider costs due to the higher proportion of delivery revenue. Food and paper costs accounted for 31.7%. Occupancy and other operating expenses accounted for approximately 26.0%. The company's restaurant-level margin was 13.0%, an improvement of 0.7 percentage points year-on-year, driven by operating leverage from revenue growth. The general and administrative expense ratio was 6%, flat year-on-year.
Net store additions in 2026 are projected to exceed 1,900. The company announced shareholder returns of approximately USD 1.5 billion for 2026, with projected average annual shareholder returns of USD 900 million to over USD 1 billion for 2027-2028, exceeding USD 1 billion in 2028. The total number of stores is expected to exceed 20,000 by the end of 2026. Net store additions in 2026 are projected to surpass 1,900, with the franchise proportion among new KFC and Pizza Hut stores expected to reach 40-50%.
Risk warnings include: weakening consumer spending power, underwhelming performance in lower-tier markets, slower-than-expected brand incubation, and intensifying industry competition.
Comments