UOB Kay Hian: YUM CHINA (09987) Q3 Same-Store Sales Below Expectations, but Operating Profit Beats Expectations

UOB Kay Hian issued a research report stating that YUM CHINA (09987) Q3 2026 same-store sales fell 3% year-on-year, missing market expectations, but adjusted operating profit beat expectations. The broker raised its 2026 earnings forecast by 2%, kept its 2027 forecast unchanged, reiterated its "Buy" rating, and maintained its target price at HK$513.7. YUM CHINA's Q3 adjusted operating profit rose 6% year-on-year, 3% above market expectations, driven by margin expansion benefiting from streamlined operations and favorable commodity costs. Q3 system sales grew 3% year-on-year; total revenue was US$3.5 billion, up 2% year-on-year excluding FX effects, broadly in line with expectations. Adjusted operating profit was US$451 million, with operating margin up 0.5 percentage points year-on-year to 13%, better than earlier guidance of broadly flat; restaurant margin was 17.8%, up 0.5 percentage points year-on-year. Adjusted net profit was US$311 million, up 3% year-on-year. During the period, net new store openings were 692, bringing the total store count to 19,989. Management expects Q4 2026 same-store sales to improve sequentially, same-store transaction volume to continue growing, and operating margin to be broadly flat year-on-year (excluding the approximately 0.5 to 0.6 percentage point contribution from the Pizza Hut acquisition). The 2026 net new store target was raised from 1,900 to over 2,400, implying more than 20,500 stores by year-end. The 2027 target is same-store sales growth of 0% to 2%, with diluted earnings per share recording double-digit growth (including mid-single-digit accretion from the Pizza Hut acquisition).