The Zhitong Finance App learned that Guangfa Securities released a research report stating that it maintained the Yum China (09987) “buy” rating and gave the company an 18-fold price-earnings ratio (PE) in 2027, corresponding to the reasonable value of Hong Kong stocks at HK$504.87 per share. Considering exchange rate factors, it corresponds to a reasonable value of US$64.37/ADS for US stocks. The bank estimates that the company's net profit from 2026 to 2028 will be US$1.03 billion, US$1.16 billion and US$1.27 billion, respectively. The company's revenue for the third quarter of 2026 was US$3.5 billion, up 8% year on year; core operating profit was US$420 million, up 6% year on year; net profit to mother was US$310 million, up 10% year on year. The bank believes that the company's single-store UE continues to be optimized, store expansion expectations are strong, and high shareholder return guidelines are maintained.
The main views of GF Securities are as follows:
Results increased in the third quarter of 2026, and profit margins continued to improve
The company announced results for the third quarter of 2026, achieving revenue of US$3.5 billion, up 8% year on year, 2% year on year after excluding foreign currency conversion; core operating profit of US$420 million, up 6% year on year; net profit to mother of US$310 million, up 10% year on year, and 3% year on year after excluding foreign currency conversion.
In the third quarter of 2026, the company's restaurant profit margin and operating profit margin both increased 0.5 percentage points year on year. Through efficiency optimization, KFC achieved a 0.1 percentage point increase in restaurant profit margin; after Pizza Hut completed the acquisition of the brand's ownership in mainland China in August, the savings on franchise fees began to be reflected, and the restaurant's profit margin increased 1.9 percentage points year over year.
Same-store sales in the third quarter were affected by the high takeout subsidy base and the weather in August
In the third quarter of 2026, the company's overall system sales increased 3% year on year. Among them, same-store sales fell 3% year on year, and net new stores contributed 6 percentage points.
KFC same-store sales fell 3% year on year, up 1% year on year in the second quarter of 2026; customer unit price fell 5% year on year and fell 3% year on year in the second quarter; transaction volume increased 3% year on year, and increased 4% year on year in the second quarter.
Pizza Hut's same-store sales fell 3% year on year, up 1% year on year in the second quarter of 2026; customer unit prices fell 8% year on year and fell 11% year on year in the second quarter; transaction volume increased 5% year on year, and increased 13% year on year in the second quarter.
The net increase in stores in the third quarter reached a quarterly high, and the guidelines for opening stores for the whole year were raised
In the third quarter of 2026, the company's overall net number of stores increased by 692 to 19,989, with a cumulative net increase of 1,888 in the first three quarters. The company raised its annual net store growth target from more than 1,900 to more than 2,400.
KFC had a net increase of 1,310 stores to 14,307 in the first three quarters of 2026, with a net increase of 518 in the third quarter; Pizza Hut had a net increase of 572 stores to 4,740 in the first three quarters.
Follow the growth of new modules
As of the third quarter of 2026, Kenyue Coffee has more than 4,000 stores, a net increase of more than 700, with a target of 5,000 in 2027; KPRO has opened more than 700 stores, a net increase of more than 150, and the company raised its target of 850 by the end of the year, 50 more than the target previously proposed in the second quarter.
Pizza Hut Hamburg covered more than 300 stores by the third quarter of 2026, with the goal of breaking 500 by the end of 2026 and 1,000 by 2027.
Shareholder returns remain at an excellent level
In the first three quarters of 2026, the company gave back a total of US$1.08 billion to shareholders, including US$778 million in stock repurchases and US$302 million in cash dividends. The annual shareholder return target remained at US$1.5 billion, and the return rate corresponding to the current market value was about 9%.
The company expects to return 900 million to more than 1 billion US dollars to shareholders every year from 2027 to 2028, accounting for about 100% of free cash flow. Based on the market value on November 3, 2026, the corresponding return is about 5.4%-6%.
Risk Alerts
Macroeconomic fluctuations; store expansion falling short of expectations; increased market competition, etc.