Caitong Securities: Yum China (09987) Announces RGM3.0 Strategy to Maintain “Gain” Rating

The Zhitong Finance App learned that Caitong Securities released a research report saying that the Yum China (09987) store maintained resilient growth, the stores continued to expand, and the trend continued to improve. The bank believes that the company has long-term leading scale, brand influence, industry management capabilities, and digital capabilities. The bank expects the company's net profit to be 9.2/991/1,057 million US dollars in 2025-2027, respectively, and the corresponding PE is 19X/17X/16X, respectively, maintaining the “increase in holdings” rating.

The main views of Caitong Securities are as follows:

The company announced the RGM3.0 strategy

The company announced the RGM3.0 strategy on Investor Day, continuing to focus on the three core dimensions of resilience, growth, and moat, adhering to the “innovation and efficiency improvement” two-wheel drive strategy, and adopting the development concept of “front-end stratification and back-end aggregation”. That is, the front-end covers a wide range of consumer scenarios and customer groups through multi-brand portfolios and diversified product lines; at the back end, efficiency is improved through cross-store and cross-regional resource sharing and integration, and a stronger synergy effect is built.

Accelerate the expansion of the store network

As of 3Q2025, there were 17,514 stores nationwide, a net increase of 1,119 stores compared to 2024. The company announced store growth targets for the next five years: steadily advancing the goal of reaching 20,000 stores by 2026; increasing the total number of stores to more than 25,000 in 2028; and striving to exceed 30,000 stores by 2030. In terms of franchise stores, the proportion of franchisees in the net new stores of KFC and Pizza Hut will reach 40%-50% and 20%-30% respectively in 2025. The company plans to gradually increase the franchise ratio within the target range in the next few years.

Shareholder Reward Program

As of 3Q2025, the company has given back US$950 million to shareholders in the first nine months and is expected to return approximately US$1.5 billion to shareholders for the full year of 2025. On the basis that it has already given back US$1.5 billion to shareholders in 2024, the company aims to give back US$3 billion to shareholders between 2025 and 2026. Starting in 2027, approximately 100% of free cash flow will be returned to shareholders after deducting dividends paid to minority shareholders of subsidiaries.

KFC's target profit exceeds 10 billion dollars

KFC added a net of 992 stores in the first nine months. By 2028, the company plans to increase the total number of stores by about one-third to more than 17,000, and strive to exceed RMB 10 billion in operating profit, becoming the first domestic restaurant brand to cross this milestone.

Pizza Hut aims to double profits within five years

Pizza Hut added a net of 298 stores in the first nine months. In the next three years, Pizza Hut plans to add more than 600 net stores every year. By 2028, the total number of stores will cross the 6,000 mark. The goal is to double operating profit in 2029 compared to 2024.

Lavasa Coffee High Line City Expands at an Accelerated Expansion

Lavasa Coffee optimizes the store model to enhance the economic efficiency of the store, and supports menu innovation and rich meal combinations through localization to drive growth. Over the next three to five years, Lavasa Coffee plans to accelerate expansion in first-tier cities and some second-tier cities. The goal is to have more than 1,000 stores and reach 60 million US dollars in retail sales by 2029.

Risk warning: macroeconomic fluctuations, food safety, rising raw material prices, etc.