Caitong Securities released a research report stating that YUM CHINA (09987) has demonstrated resilient same-store sales growth and continued store expansion, maintaining an upward trajectory. The firm believes the company possesses long-term advantages in scale, brand influence, industry management capabilities, and digitalization.

Caitong Securities forecasts YUM CHINA's net profit attributable to shareholders for 2025-2027 at $920 million, $991 million, and $1.057 billion respectively, with corresponding P/E ratios of 19x, 17x, and 16x, maintaining an "Overweight" rating. Key highlights include:

**RGM 3.0 Strategy Launch** At its Investor Day, YUM CHINA unveiled the RGM 3.0 strategy, focusing on three core dimensions: resilience, growth, and moat. The dual-driven approach of "innovation and efficiency improvement" adopts a "front-end segmentation, back-end integration" development model. This involves covering diverse consumption scenarios and customer groups through multi-brand portfolios at the front end, while enhancing efficiency through cross-store and cross-regional resource sharing at the back end.

**Accelerated Store Network Expansion** As of Q3 2025, YUM CHINA operated 17,514 stores nationwide, with a net addition of 1,119 stores in 2025. The company outlined its five-year expansion targets: reaching 20,000 stores by 2026, over 25,000 by 2028, and surpassing 30,000 by 2030. For franchised stores, KFC and Pizza Hut aim for 40%-50% and 20%-30% of net new stores in 2025, respectively, with plans to gradually increase the franchise ratio in coming years.

**Shareholder Return Program** By Q3 2025, YUM CHINA had returned $950 million to shareholders in the first nine months, with full-year 2025 returns projected at approximately $1.5 billion. Building on the $1.5 billion returned in 2024, the company targets $3 billion in shareholder returns between 2025-2026. From 2027 onward, it plans to return nearly 100% of free cash flow (after minority interest dividends) to shareholders.

**KFC Targets RMB 10 Billion Operating Profit** KFC added 992 net new stores in the first nine months of 2025. By 2028, the brand aims to expand its store count by one-third to over 17,000 locations and achieve operating profit exceeding RMB 10 billion, potentially becoming China's first F&B brand to hit this milestone.

**Pizza Hut Aims to Double Profit in Five Years** Pizza Hut added 298 net new stores in the first nine months. Over the next three years, it plans to add over 600 stores annually, surpassing 6,000 stores by 2028 and doubling its 2024 operating profit by 2029.

**Lavazza Coffee Accelerates Expansion in Tier 1-2 Cities** Lavazza Coffee is optimizing store economics through model refinement and localized menu innovation. The brand targets over 1,000 stores and $60 million in retail sales by 2029, with accelerated expansion in key cities over the next 3-5 years.

**Risk Factors**: Macroeconomic volatility, food safety, and rising raw material costs.