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Yum China Holdings Inc YUMC

Morningstar Rating
$32.12 +0.37 (1.17%)
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Company Report

Yum China’s Leading Supply and Distribution Platform Positions It Well in Fast-Growing China Market

The covid-19 pandemic provided Yum China the opportunity to accelerate store openings at more favorable lease terms. The company added more than 3,700 locations from 2020 to 2022, equivalent to a 36% increase from 2019. Now that China’s zero-covid-19 policy is in the rearview mirror, we expect these new restaurants to not only deliver significant incremental revenue but also be accretive to the overall margins. Over the next several years, we expect Yum China to speed up new unit openings. We share management's view that there remain plenty of expansion opportunities in lower-tier cities—evidenced by nearly 1,200 Chinese cities still with no KFC presence.

Price vs Fair Value

YUMC is trading at a 289% premium.
Price
$32.12
Fair Value
$51.00
Uncertainty
Medium
1-Star Price
$723.50
5-Star Price
$82.10
Economic Moat
Cmf
Capital Allocation
Zfrmqcrz

Bulls Say, Bears Say

Bulls

Average unit volume (USD 1.3 million before covid-19), pretax cash payback periods (between 2-3 years), and cash-on-cash returns (roughly 20%) for new KFC China units exceed the economics of most chains in the region.

Bears

Although the zero-covid-19 policy is officially over, restaurants still contend with cautious consumer spending.

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News

Trading Information

Previous Close Price
$31.75
Day Range
$32.0232.48
52-Week Range
$30.2761.99
Bid/Ask
$31.88 / $32.44
Market Cap
$12.41 Bil
Volume/Avg
1.7 Mil / 2.7 Mil

Key Statistics

Price/Earnings (Normalized)
15.86
Price/Sales
1.21
Dividend Yield (Trailing)
1.81%
Dividend Yield (Forward)
1.99%
Total Yield
11.74%

Company Profile

With almost 13,000 units and USD 10 billion in systemwide sales in 2022, Yum China is the largest restaurant chain in China. It generates revenue through its own restaurants and franchise fees. Key concepts include KFC (9,094 units) and Pizza Hut (2,903), but the company's portfolio also includes other brands such as Little Sheep, East Dawning, Taco Bell, Huang Ji Huang, COFFii & Joy, and Lavazza (collectively representing about 950 units). Yum China is a trademark licensee of Yum Brands, paying 3% of total systemwide sales to the company it separated from in October 2016.
Sector
Consumer Cyclical
Industry
Restaurants
Stock Style Box
Large Core
Total Number of Employees
432,000

Competitors

Valuation

Metric
YUMC
YUM
MCD
Price/Earnings (Normalized)
15.8624.9821.14
Price/Book Value
2.15
Price/Sales
1.215.337.19
Price/Cash Flow
7.3621.6418.88
Price/Earnings
YUMC
YUM
MCD

Financial Strength

Metric
YUMC
YUM
MCD
Quick Ratio
1.191.130.63
Current Ratio
1.391.490.83
Interest Coverage
4.668.46
Quick Ratio
YUMC
YUM
MCD

Profitability

Metric
YUMC
YUM
MCD
Return on Assets (Normalized)
7.09%24.93%16.58%
Return on Equity (Normalized)
13.05%
Return on Invested Capital (Normalized)
7.48%56.97%21.45%
Return on Assets
YUMC
YUM
MCD
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