20240208-招银国际-百胜中国-09987.HK-Impressive_cash_return_but_a_prudent_1Q24E_9页_1mb

Yum China (9987 HK) Equity Research Update

Analyst Recommendation:

• CMB International Global Markets maintains a "BUY" rating for Yum China.
• Target Price Trims: Revised down from HK$435.82 to HK$384.17, reflecting a 15.4% downside from current price, due to industry de-rating and competitive pressures.

Key Performance Highlights:

• 4Q23 Results: Beat consensus despite 20.4% sales growth, driven by faster-than-expected same-store-sales growth (SSSG) and higher-than-expected gross profit.
• FY23 Performance: Revenue grew 14.7% YoY to US$10.978 billion (inline with estimates), and net profit surged 89.3% to US$827 million, beating benchmarks.
• 1Q24E Outlook: Cautious due to a tough base; forecasted 4% SSSG decline and flat core operating profit (around US$390 million). However, sequential recovery expected in SSSG by 2Q-4Q24E.

Strategies and Market Share Gain:

• Execution of new product launches (e.g., five burgers during CNY, juicy whole chicken) and pricing strategies to attract rational customers.
• Enhanced market share through innovative, affordable offerings, supported by aggressive store expansion and digital marketing.

Valuation:

• Current P/E ratio: 21.8x for FY24E, undemanding after revised forecast.
• 5-year average P/E: 27x, now 24x, reflecting industry challenges.
• Peer comparisons (e.g., McDonald's at 22.9x P/E) indicate reasonable value.

Additional Insights:

• Earnings revised up for FY24E/FY25E, factoring in strong 4Q23 but tempered 1Q24E growth.
• High dividend payout and share buybacks (US$1.5 billion in FY23) enhance shareholder returns.

Notes

• Pair trade recommended: Long YUMC hedged with peers like XBXB (520 HK).
• Disclosures: Report includes standard risk disclaimers and analyst certification.