Equity Analyst

Steve Zhou, CFA

Over 13 years of professional experience covering mainly Asian consumer companies in sell-side and buy-side.

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

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings (9987 HK)</a>'s 1Q24 earnings were weaker than the already lowered consensus expectations, as both sales and core operating profit only grew 1% yoy.</li>
<li>Same-Store-Sales declined by 3% yoy, and restaurant margin declined by 2.7ppt yoy, mainly due to more discounts offered.</li>
<li>China's catering industry has changed compared to pre-COVID, where overall average selling price (ASP) is continually under pressure, and customers are increasing seeking value-for-money options.</li>
</ul>



Yum China Holdings (9987 HK)'s 1Q24 earnings were weaker than the already lowered consensus expectations, as both sales and core operating profit only grew 1% yoy.
Same-Store-Sales declined by 3% yoy, and restaurant margin declined by 2.7ppt yoy, mainly due to more discounts offered.
China's catering industry has changed compared to pre-COVID, where overall average selling price (ASP) is continually under pressure, and customers are increasing seeking value-for-money options.


Yum China (9987 HK/YUMC US):  Earnings Risk Materialized As 1Q24 Earnings Were Weak