Jingu News | Guosen Securities' research report pointed out that on September 24th, Yum China (09987) announced that the Yum China Supply Chain Management Center located in Jiading District, Shanghai, has officially completed construction and commenced operation, making it Yum China's largest self-built supply chain center.
The bank mentioned that the company's performance in the same stores and the pace of store expansion in the first half of 2024 remained strong, and relying on refined cost and expense control, the adjusted net income growth rate in 2024Q2 turned positive. Recently, there have been frequent bullish policies to stimulate consumer spending domestically. The bank analyzed that the company is expected to continue to show a stable trend in operations in the second half of the year, with projected revenues of 11.779/12.898/14.098 billion USD for 2024-2026 (adjustment direction of +0.3%/+0.4%/+0.4%), and net income attributable to shareholders of 0.88/0.958/1.046 billion USD (adjustment direction of +2.3%/+2.1%/+2.2%) for the same period. The company has repurchased over 25.57 million shares since the beginning of the year (equivalent to 6.3% of the outstanding shares at the end of 2023). Based on the latest share capital assumption, the EPS for 2024-2026 is estimated to be 2.30/2.51/2.74 USD, with corresponding PE ratios of 20.1/18.5/17.0x.
The bank believes that the company's medium-term target of double-digit annualized earnings per share growth is highly achievable. By reviewing Yum China's historical valuation levels (refer to the detailed valuation table in the main text), the market often tends to give the company a valuation premium when there is a turning point in business performance. Considering the company's current stable operational status and the potential performance improvement expected in the second half of the year after the introduction of consumption-stimulating policies, the bank gives a 2024 PE target of 23-25x, corresponding to a target price of 411.5-447.3 Hong Kong dollars, still offering 14%-23.9% upside potential compared to the latest closing price, maintaining the company's "outperform the market" rating.
