YUM CHINA(9987.HK):THE BEST-IN-CLASS COSTS MANAGEMENT IN 2Q24
YUM CHINA(9987.HK):THE BEST-IN-CLASS COSTS MANAGEMENT IN 2Q24
Maintain BUY but trim TP to HK$ 294.91. Our new TP is based on 15x FY25E P/E (rolled over from 23x FY24E to factor in the sector de-rating). We fine-tuned FY24E/ 25E/ 26E net profit by +3%/ -1%/ -1% to reflect the 2Q24 results beat. It is now trading at an undemanding valuation at 13x FY25E P/E.Sales growth was indeed a miss in 2Q24, but the net profit was a significant beat. For 2H24E, we are still very cautious about the demand and so as the level of competition. However, thanks to various efforts like Project Fresh Eye, Project Red Eye, rationalizing number of SKUs, more direct sourcing, and ramp up of more profitable store formats (e.g. K-coffee and Pizza Hut's WOW model) etc., we are confident on a turnaround in 4Q24E. Maintain BUY with TP of HK$294.91, based on 15x FY25E P/E. The stock is now trading at 13x FY25E P/E.
2Q24的銷售增長確實低於預期，但淨利潤則大幅超出預期。我們依然對2H24E的需求和競爭保持謹慎態度。然而，多項舉措（如《項目清新眼》、《紅眼項目》、SKU數量的合理化、更多的直接採購以及更多利潤更高的店鋪格式的推出（如K咖啡和必勝客的WOW模式）等）讓我們相信有望在4Q24E實現扭轉局面。我們維持買入評級，目標價爲294.91港元，基於FY25E的15倍市盈率。該股票目前在FY25E的13倍市盈率處交易。
We are still conservative about the topline growth in 2H24E. We believe the growth will still be hindered by high base and weak macro environment, and therefore our SSSG assumptions for KFC/ Pizza Hut are -3%/ -6% in 3Q24E and +4%/ +2% in 4Q24E. In fact, these numbers have already considered many positive factors like 1) expanding price range in order to tap into a large group of customers (e.g. the sales of entry price pizzas in Pizza Hut has experienced double-digit growth in 2Q24), 2) launches of more innovation new products, as well as more one person meals, 3) ramp- up of new store formats such as K-coffee (targeting 500-600 stores by FY24E, from 300 in Jul 2024) and Pizza Hut's WOW model (targeting 200 stores by FY24E, from 100 in Jul 2024),etc..
我們對2H24E的銷售增長仍持保守態度。我們認爲增長仍會受到高基數和宏觀環境疲軟的制約，因此我們對肯德基/必勝客的SSSG的假設爲3%/6%（3Q24E）和4%/2%（4Q24E）。事實上，這些數字已經考慮到許多積極因素，比如1)拓寬價格範圍以便吸引更多客戶（如必勝客低價披薩的銷售在2Q24實現了兩位數增長）、2）推出更多創新新產品和單人餐、3）推出新店鋪格式，如K咖啡（旨在到FY24E開設500-600家店鋪，而在2024年7月爲300家）和必勝客的WOW模式（旨在到FY24E開設200家店鋪，而在2024年7月爲100家），等等。
But relatively more comfortable on bottom-line growth in 2H24E. Even with the potential operating deleverage, we still think the OP margin can be at least stable in FY24E (vs FY23), because of various costs saving initiatives: 1) Project Red Eye (started in late 1Q24), which targets to improve supply chain efficiency by spending better, from the customer point of view, such as simplifying the number of SKUs, or reducing unnecessary items provided to the customers in the past (e.g. ingredients like syrups for coffee, different packaging items, etc.), 2) sourcing more directly with the farmers, 3) Project Fresh Eye (started in 4Q23), which is aiming to improve the operational efficiency, by reducing the complexity of operational process, from the store manager's point of view, hence they are able to focus more on other tasks, 4) greater use of AI and automations, by rolling out systems like Pizza Hut's i-kitchen, which is able to enhance food quality, safety and operational efficiency, also, more than 80%/ 50% of Pizza Hut stores have equipped with automated fried rice machines and robotic servers, 5) minimal labour costs inflation (e.g. at around LSD in FY24E), 6) rigid control over G&A expenses, targeting 5% of sales (vs 5.8% in FY23), and 7) reduced A&P expenses, as % of total sales. All in all, we are now expecting sales/ OP/ NP growth to be at around 2%/ 8%/ 7% in 3Q24E and +1%/ 30%/ 13% in 4Q24E.
但對2H24E的底線增長更爲樂觀。即使考慮到潛在的運營槓桿作用，我們仍認爲OP利潤率在FY24E（與FY23相比）至少能夠保持穩定，這是基於多項成本節約舉措：1)《紅眼項目》（始於1Q24末），旨在從客戶角度着手，通過改進供應鏈效率（如簡化SKU數量或減少過去爲客戶提供的不必要物品——例如咖啡糖漿、不同的包裝等）；2）更多直接與農民的採購；3）《項目清新眼》（始於4Q23），旨在從店鋪經理的角度着手，減少操作過程的複雜性，從而使其能夠更多地專注於其他任務；4）更多對人工智能和自動化的應用，如推出必勝客的i-kitchen，能夠提高食品質量、安全和運營效率，此外超過80%/50%的必勝客店鋪已經配備了自動炒飯機和機器人服務員；5）最小化勞動力成本膨脹（如FY24E約在低單位數增長），6）嚴格控制G&A費用，以銷售收入的5%爲目標（vsFY23的5.8%），7)作爲總銷售額的一部分減少廣告和促銷活動費用。總的來說，我們現在預計3Q24E的銷售增長、運營利潤增長和淨利潤增長將分別達到2%、8%、7%，而4Q24E的增長率將分別達到1%、30%、13%。
Maintain BUY but trim TP to HK$ 294.91. Our new TP is based on 15x FY25E P/E (rolled over from 23x FY24E to factor in the sector de-rating). We fine-tuned FY24E/ 25E/ 26E net profit by +3%/ -1%/ -1% to reflect the 2Q24 results beat. It is now trading at an undemanding valuation at 13x FY25E P/E.
維持買入評級，但將目標價下調至294.91港元。我們將目標價由FY24E的23倍市盈率滾動至FY25E的15倍市盈率（考慮到板塊的下調），並微調FY24E/25E/26E的淨利潤，對2Q24的結果進行修正，分別爲：+3%、-1%、-1%。該股票現在的估值處於不苛求的水平，FY25E的市盈率爲13倍。
2Q24 net profit was a significant beat. Yum China's sales rose by just 1% to US$ 2.68bn in 2Q24, and missed BBG/ CMBI est. by 3%/ 4%, mainly due to the weak SSSG (-3%/ -8% for KFC/ Pizza Hut) and increased mix of smaller sized stores. However, Yum China's net profit increased by 8% to US$ 212mn in 2Q24, 12%/ 21% higher than BBG/ CMBI est., thanks to: 1) resilient GP margin (esp. for Pizza Hut), at 70.3%, vs BBG/ CMBI est. of 68.9%/ 69.9%, 2) stable labour costs and rental expenses (both are flattish YoY), 3) increased focus on operational efficiency (hence G&A expenses fell by 13% YoY), etc. Moreover, the EPS growth was even more impressive at 17% in 2Q24, mostly driven by the massive amount of shares buyback. In terms of segment, the delivery sales growth was rather robust at 11% while the dine-in sales has dropped by 3%. KFC's SSS was resilient, dropped only by 3% in 2Q24 (vs -2% in 1Q24) while Pizza Hut's SSS decline was as high as 8% (vs -% in 1Q24). However, Pizza Hut's profitability has outperformed KFC, as the restaurant level OP margins for KFC/ Pizza Hut were at 16.2%/ 13.2%, -1.1ppt/ +0.8ppt vs last year.
2Q24淨利潤大幅超出預期。百勝中國的銷售額在2Q24僅增長了1%，達到了26.8億美元，低於BBG/CMBI的預期3%/4%，主要由於SSSG疲軟（肯德基/必勝客分別爲-3%/-8%）以及小型商店increased mix。不過，百勝中國的淨利潤在2Q24增長了8%，達到了2.12億美元，比BBG/CMBI預期高出12%/21%，其中原因包括：1）非常強韌的GP利潤率（尤其是對於必勝客），爲70.3%，遠高於BBG/CMBI的68.9%/69.9%的預期，2）穩定的勞動力成本和租金支出（兩者較去年持平），3）提高運營效率的重點（因此，G&A費用同比下降13%），等等。此外，在EPS增長方面，2Q24增長率更爲驚人，這主要是由於股票的大量回購。在細分市場方面，外賣銷售增長相當強勢，11%，而堂食銷售下降了3%。肯德基的SSS表現堅韌，2Q24僅下降了3%（而1Q24爲-2%），而必勝客的SSS下降高達8%（而1Q24爲-%）。然而，必勝客的盈利能力表現優於肯德基，在肯德基/必勝客的餐廳運營利潤率分別爲16.2%/13.2%，比去年同期分別下降了1.1ppt/+0.8ppt。
Store opening plan in FY24E remained intact. Yum China is maintaining its net new stores target of 1,500 to 1,700 (so as the capex target of US$ 700mn to 850mn) in FY24E. But we do think this is totally adjustable if the macro environment becomes much less friendly. The mix of franchise stores has reached about 25% for KFC in 2Q24, which is a beat vs the mix of 15% to 20% mentioned in the 3 years target (FY24E-26E). We are not only confident that the franchisees can secure excellent locations for store expansions (by leveraging their local wisdom) but also deliver a decent operation quality, thanks to the highly digitalized system and modernized management method.
FY24E的店鋪開設計劃仍將保持不變。百勝中國在FY24E維持其1,500-1,700家新淨店計劃（以及7.0億美元至8.5億美元的資本支出目標）。但如果宏觀環境變得不那麼友好，我們認爲這完全是可調整的。在2Q24中，肯德基的特許經營店比例已經達到了25%，超過了3年的目標（FY24E-26E）中15%-20%的佔比。我們不僅有信心，特許經營店能夠通過利用其當地的智慧爲店鋪擴張獲得優越的位置，而且還能夠提供良好的運營質量，這要歸功於高度數字化的系統和現代化的管理方法。
Change of CFO. Andy Yeung (CFO since 2019) will depart from Yum China from Oct 2024, but will be appointed as an advisor to the CEO from Oct 2024 to Feb 2025. He is leaving the Company to pursue another professional opportunity. Adrian Ding, the current CIO of Yum China and previously the GM of the Lavazza JV, will become the acting CFO.
CFO的更迭。自2019年以來擔任CFO的Andy Yeung將在2024年10月離開百勝中國，但自2024年10月至2025年2月將被任命爲首席執行官的顧問。他離開公司是爲了追求其他職業機會。百勝中國的現任首席信息官（CIO）丁培寧將擔任代理CFO。他之前擔任過Lavazza JV的總經理。
2Q24 net profit was a significant beat. Yum China's sales rose by just 1% to US$ 2.68bn in 2Q24, and missed BBG/ CMBI est. by 3%/ 4%, mainly due to the weak SSSG (-3%/ -8% for KFC/ Pizza Hut) and increased mix of smaller sized stores. However, Yum China's net profit increased by 8% to US$ 212mn in 2Q24, 12%/ 21% higher than BBG/ CMBI est., thanks to: 1) resilient GP margin (esp. for Pizza Hut), at 70.3%, vs BBG/ CMBI est. of 68.9%/ 69.9%, 2) stable labour costs and rental expenses (both are flattish YoY), 3) increased focus on operational efficiency (hence G&A expenses fell by 13% YoY), etc. Moreover, the EPS growth was even more impressive at 17% in 2Q24, mostly driven by the massive amount of shares buyback. In terms of segment, the delivery sales growth was rather robust at 11% while the dine-in sales has dropped by 3%. KFC's SSS was resilient, dropped only by 3% in 2Q24 (vs -2% in 1Q24) while Pizza Hut's SSS decline was as high as 8% (vs -% in 1Q24). However, Pizza Hut's profitability has outperformed KFC, as the restaurant level OP margins for KFC/ Pizza Hut were at 16.2%/ 13.2%, -1.1ppt/ +0.8ppt vs last year.
2Q24淨利潤大幅超出預期。百勝中國的銷售額在2Q24僅增長了1%，達到了26.8億美元，低於BBG/CMBI的預期3%/4%，主要由於SSSG疲軟（肯德基/必勝客分別爲-3%/-8%）以及小型商店increased mix。不過，百勝中國的淨利潤在2Q24增長了8%，達到了2.12億美元，比BBG/CMBI預期高出12%/21%，其中原因包括：1）非常強韌的GP利潤率（尤其是對於必勝客），爲70.3%，遠高於BBG/CMBI的68.9%/69.9%的預期，2）穩定的勞動力成本和租金支出（兩者較去年持平），3）提高運營效率的重點（因此，G&A費用同比下降13%），等等。此外，在EPS增長方面，2Q24增長率更爲驚人，這主要是由於股票的大量回購。在細分市場方面，外賣銷售增長相當強勢，11%，而堂食銷售下降了3%。肯德基的SSS表現堅韌，2Q24僅下降了3%（而1Q24爲-2%），而必勝客的SSS下降高達8%（而1Q24爲-%）。然而，必勝客的盈利能力表現優於肯德基，在肯德基/必勝客的餐廳運營利潤率分別爲16.2%/13.2%，比去年同期分別下降了1.1ppt/+0.8ppt。
Store opening plan in FY24E remained intact. Yum China is maintaining its net new stores target of 1,500 to 1,700 (so as the capex target of US$ 700mn to 850mn) in FY24E. But we do think this is totally adjustable if the macro environment becomes much less friendly. The mix of franchise stores has reached about 25% for KFC in 2Q24, which is a beat vs the mix of 15% to 20% mentioned in the 3 years target (FY24E-26E). We are not only confident that the franchisees can secure excellent locations for store expansions (by leveraging their local wisdom) but also deliver a decent operation quality, thanks to the highly digitalized system and modernized management method.
FY24E的店鋪開業計劃保持不變。百勝中國將在FY24E保持1500至1700家新店目標(以及7億美元到8.5億美元的資本支出目標)。但是，如果宏觀環境變得不太友好，我們認爲這完全可以進行調整。KFC在2Q24的特許經營店鋪佔比已達到約25%，超過了3年目標(FY24E-26E)中提到的15%到20%的佔比。我們不僅有信心特許經營者能夠通過利用他們的地方智慧來獲得出色的店面擴張位置，而且還能夠提供不錯的運營質量，這要歸功於高度數字化的系統和現代化的管理方法。
Change of CFO. Andy Yeung (CFO since 2019) will depart from Yum China from Oct 2024, but will be appointed as an advisor to the CEO from Oct 2024 to Feb 2025. He is leaving the Company to pursue another professional opportunity. Adrian Ding, the current CIO of Yum China and previously the GM of the Lavazza JV, will become the acting CFO.
首席財務官更替。安迪·楊（自2019年以來擔任首席財務官）將於2024年10月離開百勝中國，但將在2024年10月至2025年2月擔任首席執行官顧問職務。他離開公司是爲了追求另一個職業機會。百勝中國現任首席信息官、前 Lavazza合資企業總經理丁揚將成爲臨時首席財務官。
譯文內容由第三人軟體翻譯。
