Soochow: Initiates "Buy" rating for Yum China (09987), there is still room for opening stores and same-store improvement can be expected

Soochow released a research report stating that they are initiating coverage of YUM CHINA (09987) for the first time, with a "buy" rating. They forecast that the company's revenue for 2025-2027 will be 12.019/12.758/13.496 billion US dollars, with year-on-year growth rates of 6%/6%/6%; and the company's net profit attributable to shareholders for 2025-2027 will be 952 million/1.017 billion/1.091 billion US dollars, with year-on-year growth rates of 4%/7%/7%. The corresponding PE ratios for 2025-2026 are 16.79x and 15.71x. Considering that there is still room for the company's store penetration and new store formats are promising, the bank believes that the current valuation still offers good value for money. The bank stated that YUM CHINA still has room for store expansion and potential for same-store improvement: (1) The company is expanding in first-tier cities, speeding up store expansion in lower-tier cities and functional areas. As of the first half of 2025, KFC has already opened 12,238 stores in China. Compared to Hua Lai Shi (according to big data from the restaurant industry, by July 2025, there were approximately 19,812 stores with a 97% urban coverage rate), there is still room for further penetration and potential for expansion in lower-tier markets. (2) Actively exploring new store formats, with potential for same-store improvement: Innovative store formats such as Pizza Hut's wow concept, KFC's mini-town model, and KFC Coffee, cater to different consumer needs in various settings.