Huayuan Securities has released a research report forecasting that Yum China's net profit attributable to shareholders for 2026-2028 will be $1.071 billion, $1.156 billion, and $1.242 billion, respectively, representing year-on-year growth rates of 15%, 8%, and 8%. The corresponding price-to-earnings ratios based on the current share price are 19x, 17x, and 16x. Given the company's stable operational performance and clear store expansion guidance, an "Overweight" rating is maintained.
Key points from Huayuan Securities are as follows: On February 4, 2026, the company released its results for the fourth quarter of 2025. During that quarter, revenue reached $2.82 billion, a 9% year-on-year increase, while net profit attributable to shareholders was $140 million, up 24% year-on-year. The operating profit margin and net profit margin for the fourth quarter were 6.6% and 5.0%, respectively, increasing by 0.8 and 0.5 percentage points compared to the previous year. For the full year 2025, the company achieved revenue of $11.80 billion, a 4% year-on-year increase, and net profit attributable to shareholders of $930 million, up 2% year-on-year.
The company demonstrated persistent progress, achieving positive same-store sales growth for three consecutive quarters. In the fourth quarter of 2025, same-store sales grew by 3%, marking the third straight quarter of growth. Specifically, KFC's same-store sales increased by 3%, with same-store transaction volume rising 3% year-on-year; average spending per customer remained flat compared to the same period in 2024, as growth in small-value orders was offset by an increased proportion of delivery sales. Pizza Hut's same-store sales grew by 1%, with same-store transaction volume up 13% year-on-year, aligning with the company's mass-market strategy.
The target of 20,000 stores is nearing achievement, with Yum China planning to exceed 30,000 total stores by 2030. By the end of 2025, the total store count reached 18,101, with a net addition of 1,706 stores for the full year, including 587 net new stores in the fourth quarter, indicating an accelerated pace of expansion in the second half. This rapid store growth is supported by more flexible store formats and franchise arrangements: the company's "side-by-side" model facilitates rapid expansion, with K Coffee reaching 2,200 stores in 2025 and K-Pro entering hundreds of KFC locations. In 2025, the company piloted the Gemini store model, which involves opening a KFC and a Pizza Hut side-by-side at the same location, with a combined capital expenditure of approximately 700,000 to 800,000 RMB per pair. This model is planned for expansion into more lower-tier cities. Approximately 40 Gemini store pairs were added in 2025, with an accelerated rollout expected in 2026.
The company plans to complete $1.5 billion in dividends and share repurchases for the full year 2026. From 2027 to 2028, shareholder returns are projected to average approximately $9 billion to over $10 billion annually. Starting in 2027, the company intends to return approximately 100% of its free cash flow, after deducting dividends paid to minority shareholders of subsidiaries, to shareholders. Estimated annual shareholder returns for 2027 and 2028 are expected to average between $9 billion and over $10 billion. Assuming an annual return of $9 billion to shareholders in both 2027 and 2028, this amount would represent approximately 5% of the company's market capitalization as of February 3, 2026.
Risk factors include weaker-than-expected macroeconomic consumption, intensified competition in the fast-food industry, and a significant decline in dine-in and delivery customer traffic.