Equity Analyst

Steve Zhou, CFA

Equity Bottom-Up

<ul>
<li>China's catering industry has changed compared to pre-COVID19, where overall average selling price (ASP) is continually under pressure, and customers are increasing seeking value-for-money options due to weaker consumer sentiment. </li>
<li>Yum China's same-store-sales growth could be under pressure if the company cannot raise ASP easily like in previous years.  </li>
<li>Yum China's historical valuation should not be used as a benchmark, given that the growth profile has changed (new store openings reaching a plateau; sustained increased competition; lower ASP pressure). </li>
</ul>


China's catering industry has changed compared to pre-COVID19, where overall average selling price (ASP) is continually under pressure, and customers are increasing seeking value-for-money options due to weaker consumer sentiment. 
Yum China's same-store-sales growth could be under pressure if the company cannot raise ASP easily like in previous years.  
Yum China's historical valuation should not be used as a benchmark, given that the growth profile has changed (new store openings reaching a plateau; sustained increased competition; lower ASP pressure). 


Yum China (9987 HK/YUMC US):  Earnings And Derating Risks Not Priced In

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>We do concur with management’s cautious view for 1Q24E (targeting a flattish core OP).</li><li>However, we think the trend is constructive and HSD sales and OP growth is still achievable in FY24E. </li><li>Pair trade is also recommended.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We do concur with management’s cautious view for 1Q24E (targeting a flattish core OP).However, we think the trend is constructive and HSD sales and OP growth is still achievable in FY24E. Pair trade is also recommended.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Yum China (9987 HK) – Impressive Cash Return but a Prudent 1Q24E

<ul><li>3Q23 result was a miss, due to weak demand, slow SSSG and intense competition.</li><li>We think Yum China has turned more active to gain or at least retain its market share, perhaps at the expenses of lower GP margin and higher opex (e.g. staff costs).</li><li>But thanks to low valuation (after our earnings cut), we maintain BUY.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

3Q23 result was a miss, due to weak demand, slow SSSG and intense competition.We think Yum China has turned more active to gain or at least retain its market share, perhaps at the expenses of lower GP margin and higher opex (e.g. staff costs).But thanks to low valuation (after our earnings cut), we maintain BUY.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Yum China (9987 HK) – 3Q23 Result Missed and We Will Stay Cautious

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>Giant Biogene was listed in Hong Kong IPO in 2022. It has done well since and is now trading 45% above its IPO price, but its still cheap.</li>
<li>GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.</li>
<li>In this note, we will talk about the company’s past performance and future prospects.</li>
</ul>


Giant Biogene was listed in Hong Kong IPO in 2022. It has done well since and is now trading 45% above its IPO price, but its still cheap.
GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
In this note, we will talk about the company’s past performance and future prospects.


2024 High Conviction - Giant Biogene - Growth Rate Keeps Moving Higher

Greater China Equity Long/Short Analyst

Eric Chen

<ul>
<li>Sentiment driven rally is fading. Although COVID exit remains swing factor, individual company’s performance will increasingly be driven by their business models.</li>
<li>Our proprietary store expansion framework suggests divergent growth outlook for major players - stretched for Haidilao, moderate for Jiumaojiu and Yum China, and ample for Xiabuxiabu.</li>
<li>Xiabuxiabu is our top pick due to its strong turnaround not yet priced in depressed valuation. We also like Yum China but stay cautious on Jiumaojiu and Haidilao on valuation.     </li>
</ul>


Sentiment driven rally is fading. Although COVID exit remains swing factor, individual company’s performance will increasingly be driven by their business models.
Our proprietary store expansion framework suggests divergent growth outlook for major players - stretched for Haidilao, moderate for Jiumaojiu and Yum China, and ample for Xiabuxiabu.
Xiabuxiabu is our top pick due to its strong turnaround not yet priced in depressed valuation. We also like Yum China but stay cautious on Jiumaojiu and Haidilao on valuation.     


China Catering Sector: In Search of Alpha

China

Yum China Holdings, Inc. operates chain restaurants. The Company offers pizza, entrees, pasta, rice dishes, appetizers, soups, vegetables, beverages, and desserts. Yum China Holding conducts its business worldwide.

Yum China Holdings (9987 HK)

Yum China (9987 HK/YUMC US): Earnings And Derating Risks Not Priced In

According to public news, several sell-side have come out with reports adjusting down estimates for the name in the last few days, citing negative...

Steve Zhou, CFA

Yum China (9987 HK) – Impressive Cash Return but a Prudent 1Q24E

The 4Q23 beat and massive jump in cash returns are impressive. However, as the base is still tough for 1Q24E, we believe investors can still...

CMB International

Yum China (9987 HK) – 3Q23 Result Missed and We Will Stay Cautious

We think Yum China has turned more active to gain or at least retain its market share, perhaps at the expenses of lower GP margin and higher opex...

CMB International

2024 High Conviction - Giant Biogene - Growth Rate Keeps Moving Higher

Giant Biogene was listed in Hong Kong IPO in 2022. It has done well since and is now trading 45% above its IPO price, but its still cheap.

Sumeet Singh

China Catering Sector: In Search of Alpha

Sentiment-driven rally is fading. We expect investors' focus to shift to company fundamental. Our store expansion framework points to Xiabu as the...

Eric Chen