Stock story

About the company

Yum China Holdings is China’s largest restaurant chain company and one of the largest restaurant companies globally. It has exclusive rights to operate and sub-license Western-style restaurant brands like KFC, Pizza Hut and Taco Bell and partners with international brands like Lavazza for business development.

Yum China operates more than 16,000 stores in over 1,100 cities in Mainland China, with plans to roll out a couple thousand more by 2027.

Why we like it

Yum China stands out as a strong operator in the Western quick service restaurant (QSR) segment, a category with structural advantages in China due to its scalability and standardized offerings. With a 9-year average ROIC of over 30% and ROE of over 15%, Yum China demonstrates consistently high returns and operates with a solid balance sheet, holding over US$3 billion in net cash.

Investor concerns over competition from the likes of Tastien are easing. In response to recent macro and competitive pressures, Yum China has launched aggressive cost control measures, including extended store hours, third-party delivery integration, and staff layoffs, which have supported margins. They have also used their scale to control costs.

Yum China is committed to shareholder returns, targeting US$3 billion in buybacks and dividends from 2024–2026 - more than 100% of forecasted profits - signalling confidence in its cash flow and future prospects.