Industry Investment Rating - The report maintains an Overweight (OW) rating for China, Japan, Indonesia, and the Philippines, while it is Market Weight (MW) for India, Korea, Taiwan, Singapore, and Malaysia, and Underweight (UW) for Australia, Hong Kong, and Thailand [1] - Utilities are upgraded to Overweight (OW), while staples are downgraded to Market Weight (MW) [1] Core Views - The Asia-Pacific region faces headwinds at the start of 2025, including mixed activity data, higher US 10-year yields, a stronger dollar, potential US tariffs, and elevated economic policy uncertainty [1] - Moderate returns are expected in 2025, driven by policy support, resilience, and core fundamentals [1] - The MXAPJ index target is trimmed to 620 from 630, implying a 9% USD return [1] - Earnings delivery and shareholder yield are key screening criteria, alongside structural themes like AI beneficiaries and defense spending [1] China Strategy - Chinese equities are expected to rebound after a three-year bad streak, with policy support providing a floor for the market [1] - Fiscal policy delivery is crucial for driving equity gains in 2025 [1] - Deflation is detrimental to equity returns, and China's equity market has become more investable for domestic investors [1] - ETFs have seen impressive growth, and RMB 3 trillion has been returned to shareholders [1] Asia Macro - US tariffs are a major external uncertainty for 2025, with China and Vietnam at significant risk [5] - Interest rate cuts are expected across most Asian economies, except Japan, where rate hikes are anticipated [5] - China's housing market is not expected to bottom out, and fiscal policy is expected to ease with a tilt towards consumption-oriented policies [5] Company-Specific Insights TSMC - TSMC is expected to see solid revenue growth of 26.8% YoY in 2025, driven by strong demand for leading-edge nodes, particularly AI [6] - A mid-high single-digit price hike for 3nm/5nm nodes and a 10%+ price hike for CoWoS are expected, with gross margins projected to grow to 59.3% in 2025 [6] - The 12-month target price is raised to NT$1,355 from NT$1,320 [6] Yum China - Yum China is expected to report 4.4% YoY sales growth, 4.6% restaurant profits growth, and 20.4% operating profits growth in 4Q24 [6] - SSSG for KFC and Pizza Hut is expected at -1% and -3% YoY, respectively, with 433 net store openings in 4Q24 [6] - The 12-month target price is lowered to US$58/HK$452 [6] Tencent - Tencent's platform leadership and generative AI strategies are highlighted, with a focus on critical resources and multi-strategies for AI opportunities [6] - The 12-month target price is set at HK$542 [6] GCPL - GCPL is expected to recover from cyclical headwinds, with a gradual recovery in home insecticides and soap volumes starting in 4QFY25 [8] - The 12-month target price is set at Rs1,370 [8] Japan Chemicals - Toray and Kuraray are top picks for 2025, with Toray expected to see 23% annual business profit growth and Kuraray expected to see a 21% CAGR in operating profit [8] - The 12-month target price for Toray is raised to ¥1,210, and for Kuraray to ¥2,900 [8] Kotak Mahindra Bank - The bank faces near-term challenges due to the resignation of its CTO, with investor focus on resolving tech-related issues [9] - The 12-month target price is set at Rs2,286 [9] Korea Views - Korea's caretaker government has released economic policy measures for 2025, aiming to stabilize financial markets and limit downside risks [11] - A gradual 25bp rate cut is expected in each of Q1, Q2, and Q3, with a risk of more rapid easing if domestic activity weakens [11] US Strategy - The S&P 500 is expected to rise by 11% to 6500 in 2025, driven by EPS growth [13] - Earnings growth is expected to be 11% in 2025 and 7% in 2026, with the forward P/E multiple remaining at 21.5x [13] Global FX & Rates - The US dollar is expected to remain strong in 2025, driven by tariff risks and divergent growth prospects [13] - The US yield curve is expected to steepen, with risks to higher yields in longer maturities [15]

Investment Rating - Maintains a "Buy" rating with a target price of HKD 472.48 / USD 60.95 [1][6] Core Views - Yum China (YUMC) is the largest restaurant operator in China by sales, demonstrating resilience across multiple economic cycles and accelerating its expansion into the 10,000-store era [1] - The company's growth momentum is expected to strengthen with the extension of product offerings, breakthroughs in new store formats like K Coffee and Pizza Hut WOW stores, and improved cost-effectiveness [1] - The 4Q24-1Q25 period is critical for validating same-store sales resilience and marks the beginning of the second 10,000-store target [1] - Long-term growth is supported by strong corporate governance, ample cash flow, and high shareholder returns (16.5% annualized shareholder return in 9M24) [1] Same-Store Sales Resilience - Same-store sales resilience is driven by stable demand and high customer loyalty, with strategies including cost-effective products, upgraded product combinations, and reduced delivery fees [3] - Delivery sales accounted for 40% of total sales in 3Q24, up 5 percentage points year-over-year [3] - Membership sales contributed 65% of system-wide sales, with membership numbers exceeding 510 million, a 113% increase since 2019 [3] Restaurant Profitability - Cost structure optimization is key to maintaining restaurant-level profitability, with measures including improved bargaining power for raw materials, increased store manager efficiency, and optimized rental structures [3] - Sensitivity analysis shows that a 5% increase in daily sales could boost KFC and Pizza Hut store profits by 14% and 20%, respectively, with profit margins of 19.1% and 14.9%, higher than historical averages [3] Expansion Strategy - Yum China's next 10,000-store growth will come from下沉 markets,加密 existing locations, and轻资产 models [3] - KFC and Pizza Hut have significant expansion potential, with long-term store targets of over 20,000 and 5,000 stores, respectively [3] - The company is increasing加盟店比例 to leverage regional resources and accelerate expansion [3] Financial Projections - Revenue is projected to grow from USD 11,289 million in 2024E to USD 13,147 million in 2026E, with net income increasing from USD 901.16 million to USD 1,070 million over the same period [5] - EPS is expected to rise from USD 2.30 in 2024E to USD 3.04 in 2026E, with ROE remaining stable around 13% [5] Valuation and Shareholder Returns - The target price is based on a 23x PE multiple for 2025, reflecting confidence in the company's growth trajectory [4] - Yum China has a strong track record of shareholder returns, with a 16.5% annualized return in 9M24 and plans to return USD 4.5 billion to shareholders from 2024-2026 [1][29] Market Position and Competitive Advantage - Yum China benefits from its先发优势 in下沉 markets and its ability to leverage scale effects to maintain profitability [19] - The company's strong brand,供应链 capabilities, and digital transformation efforts position it well for long-term growth [1][19]

Group 1 - The second China International Supply Chain Promotion Expo (referred to as "Chain Expo") opened in Beijing on November 26 [1] - Yum China, listed on the Hong Kong Stock Exchange, participated in this year's Chain Expo and will hold a global supplier recruitment conference during the event [2] - Yum China currently has over 800 core suppliers across various categories including food ingredients, beverages, packaging materials, construction, warehousing, and transportation [2]

Investment Rating - The report maintains a "Buy" rating for Yum China (09987.HK) [4] Core Views - The company reported Q3 2024 financial results that exceeded expectations, with total revenue reaching $3.07 billion, a year-on-year increase of 5%, marking the highest quarterly revenue in history [2] - The company plans to increase shareholder returns to $4.5 billion over the next three years, up from $3 billion, reflecting confidence in future performance [2] Financial Performance - Q3 2024 total revenue was $3.07 billion, with operating profit at $371 million, representing a year-on-year increase of 15% [2] - Core operating profit rose 18% year-on-year to $369 million [2] - The total number of stores reached 15,861, with net additions of 438 stores in Q3 2024 [2] - System sales increased by 4% year-on-year, driven by a 7% contribution from net new stores [2] Same-Store Sales and Profitability - Same-store sales continued to decline, with Q3 2024 showing a decrease of 3% for the overall company, 2% for KFC, and 6% for Pizza Hut [2] - Restaurant profit margin for Q3 2024 was 17.0%, stable compared to the previous year, with a comparable basis showing a 0.5 percentage point increase [2] Strategic Initiatives - The company optimized its delivery strategy, resulting in an 18% year-on-year increase in delivery sales, which now account for 40% of restaurant revenue [2] - Membership numbers exceeded 510 million, with member sales contributing to 64% of system sales [2] - The company is focusing on expanding its franchise model, with expectations that the proportion of franchise stores will increase to 40%-50% for KFC and 20%-30% for Pizza Hut in the coming years [2] Future Projections - Revenue projections for 2024-2026 are $11.19 billion, $12.18 billion, and $13.14 billion, respectively, with net profit estimates of $876 million, $947 million, and $1.072 billion [3][12] - The current price-to-earnings ratio is projected to be 21x, 19x, and 17x for the years 2024, 2025, and 2026, respectively [2][3]

Investment Rating - The report maintains a "Buy" rating for Yum China (9987 HK) [3] Core Views - Yum China's Q3 2024 revenue reached $3 07 billion, up 5% YoY (or 4% at constant exchange rates), with net profit attributable to shareholders increasing by 22% YoY (or 21% at constant exchange rates) [1] - The company's same-store sales decline narrowed sequentially, with KFC and Pizza Hut showing improvements in customer traffic and pricing strategies [1][12] - Yum China has accelerated its store expansion, adding 1 217 net new stores in the first three quarters of 2024, with Q3 alone adding 438 stores [2][14] - The company has raised its shareholder return plan for 2024-2026 from $3 billion to $4 5 billion, reflecting a 50% increase [2][20] Store Operations and Efficiency - Yum China's restaurant-level margin remained stable at 17 0% in Q3 2024, with KFC and Pizza Hut margins at 18 3% and 12 8%, respectively [2][18] - The company has improved operational efficiency, with salary and employee benefits as a percentage of restaurant revenue decreasing by 0 2 percentage points YoY [2] - Yum China is focusing on cost optimization, with rent and other costs as a percentage of restaurant revenue decreasing by 0 4 percentage points YoY [2] Strategic Transformation - Yum China is increasing the proportion of franchised stores, with KFC and Pizza Hut aiming for 40%-50% and 20%-30% of new stores to be franchised, respectively [3][23] - The company has introduced new store models, including KFC Town Mini stores and Pizza Hut WOW stores, which have lower investment thresholds and better unit economics [3][29] - K Coffee, a high-value coffee brand, has expanded rapidly from 100 stores in March to approximately 500 stores, with plans to reach 600 stores by the end of 2024 [3][32] Financial Projections - The report raises Yum China's net profit forecasts for 2024-2026 to $895 million, $957 million, and $1 051 billion, respectively, reflecting upward revisions of 4%, 3%, and 2% [3] - The current stock price implies a forward P/E ratio of 21x, 19x, and 18x for 2024-2026, respectively [3]

Investment Rating - The investment rating for the company is "Outperform" [1] Core Views - The company reported a revenue of $8.708 billion for the first three quarters of 2024, representing a year-on-year growth of 3% [4] - Adjusted net profit for the same period was $796 million, up 8% year-on-year [4] - In Q3 2024, revenue reached $3.071 billion, a 5% increase year-on-year, with adjusted net profit growing by 20% to $297 million [4] - The diluted EPS for Q3 2024 was $0.77, reflecting a 33% increase compared to the previous year [4] Revenue and Profitability - The company’s same-store sales improved sequentially, with overall sales growth of 4%, 6% for KFC, and 2% for Pizza Hut [4] - The same-store sales declined by 3%, 2%, and 6% for overall, KFC, and Pizza Hut respectively, indicating a recovery to approximately 88% of 2019 levels, an improvement of about 1 percentage point from Q2 [4] - KFC and Pizza Hut's order volumes increased by 1% and 4%, while average transaction prices decreased by 3% and 9% respectively [4] Store Expansion and Performance - As of Q3 2024, the total number of restaurants reached 15,861, with net additions of 1,189 stores in the first three quarters [4] - KFC had 11,283 stores, with net additions of 352 in Q3, while Pizza Hut had 3,606 stores, with 102 net additions [4] - The proportion of new stores in lower-tier cities was 58% for KFC and 60% for Pizza Hut, with franchise stores accounting for 27% and 7% respectively [4] Digitalization and Shareholder Returns - The company is advancing digitalization and delivery services, with over 510 million combined members for KFC and Pizza Hut, and member sales accounting for 64% of total sales [4] - Digital orders contributed $2.61 billion, representing 90% of restaurant revenue [4] - Delivery sales grew by 18% year-on-year, making up approximately 40% of restaurant revenue [4] - The shareholder return plan has been increased by 50%, targeting $4.5 billion from 2024 to 2026 [4] Cost Control and Efficiency - The company has successfully reduced costs, with employee costs, property rents, and other operating expenses decreasing as a percentage of restaurant revenue [4] - The cost of materials and consumables accounted for 31.7% of restaurant revenue, up 0.6 percentage points year-on-year [4] - Employee costs represented 25.1% of restaurant revenue, down 0.2 percentage points year-on-year [4] Financial Forecast and Valuation - The company is expected to achieve net profits of $901 million, $963 million, and $1.048 billion for 2024, 2025, and 2026 respectively, with growth rates of 8.9%, 6.9%, and 8.9% [4] - The estimated reasonable value range for the stock is between HKD 354.0 and HKD 432.7 per share based on a PE ratio of 18-22 times for 2025 [4]

Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive long-term outlook based on its fundamentals and growth strategies [2][3]. Core Insights - The company is expected to achieve revenue growth of 4.1%, 8.4%, and 8.2% for the years 2024, 2025, and 2026, respectively, with projected revenues of $11.43 billion, $12.38 billion, and $13.40 billion [3][4]. - Net profit is forecasted to grow by 10.2%, 8.5%, and 8.3% over the same period, reaching $911 million, $988 million, and $1.07 billion [3][4]. - The company has increased its dividend and share buyback program, raising the total planned amount from $3 billion to $4.5 billion, which represents 23% of its current market capitalization [3][4]. - The restaurant operating profit margins for KFC and Pizza Hut were reported at 18.3% and 12.8%, respectively, showing resilience in profitability [3][4]. - The company opened 438 new stores in Q3 2024, bringing the total to 15,861, with KFC and Pizza Hut showing year-on-year growth of 14% and 13% in store numbers [3][4]. Financial Summary - For the fiscal year 2023, the company reported revenues of $10.98 billion, with a year-on-year growth rate of 14.7% [4][7]. - The projected earnings per share (EPS) for 2024, 2025, and 2026 are $2.36, $2.63, and $2.92, respectively [3][4]. - The return on equity (ROE) is expected to be 12.8% in 2023, increasing to 13.5% in 2024 before slightly declining in subsequent years [7][4].

Investment Rating - The investment rating for the company is "Buy" with a target price of 446.3 HKD, indicating a potential upside of 16% from the current stock price of 387.8 HKD [1][2][3]. Core Insights - The company demonstrated resilience with a 5% year-over-year increase in total revenue to 3.07 billion USD in Q3, alongside a 4% increase in system sales. Core operating profit rose by 18%, and net profit increased by 22% to 297 million USD [2][3]. - The company has adjusted its net profit forecasts for 2024, 2025, and 2026 to 950 million, 980 million, and 1.09 billion USD respectively, with corresponding EPS estimates of 17.8, 18.3, and 20.5 HKD [2][3]. - The company has expanded its store count to 15,900, with a net addition of 438 stores in Q3, reflecting a 12.5% year-over-year growth [3]. Financial Performance Summary - Total revenue for 2023 is projected at 9.57 billion USD, with a growth rate of 14.72% expected in 2024, followed by 2.94% in 2025 and 8.87% in 2026 [5][14]. - Net profit for 2023 is estimated at 478 million USD, with a significant recovery projected in subsequent years, reaching 901 million USD in 2024 and 948 million USD in 2025 [5][14]. - The company maintains a gross margin of approximately 70%, with a net profit margin expected to stabilize around 8% in the coming years [5][15]. Valuation Analysis - The valuation methods employed include comparable company analysis and discounted cash flow (DCF) analysis, with a target price of 446.3 HKD derived from these methods, reflecting a 16.9% upside potential [7][9]. - The average PE ratio for comparable companies is projected at 18.8x for 2025, while the company is assigned a PE of 25x due to its market position and growth potential [7][9]. - The DCF analysis estimates a reasonable market value of 167.4 billion HKD, corresponding to a stock price of 434.3 HKD [7][11].

Investment Rating - The report maintains a "Buy" rating for Yum China (YUMC.US/9987.HK) with a target price of HKD 479.7 for the Hong Kong-listed shares and USD 61.5 for the US-listed shares [2][3] Core Views - Yum China's 3Q24 operating profit growth exceeded expectations due to cost reduction and efficiency improvements [2] - The company's flexible operational strategies and strong management capabilities are driving improved same-store sales and continued cost optimization [2] - Yum China plans to increase shareholder returns from USD 3 billion to USD 4.5 billion for 2024-2026, which is expected to boost market sentiment [2] Same-Store Sales Outlook - Same-store sales are expected to trend positively in 2025, with KFC likely to return to positive same-store sales growth and Pizza Hut narrowing its decline [2] - KFC's average check is expected to remain stable, while Pizza Hut's average check may face downward pressure due to the increasing proportion of WOW stores [2] Cost Optimization and Efficiency - Despite declining average checks, restaurant-level margins remained flat YoY in 3Q24, and operating margins expanded by 1.0ppt [2] - The company expects cost optimization efforts to continue, though the marginal benefits may weaken in 2025 [2] - Management aims to maintain the administrative expense ratio below 5% in the medium to long term [2] Franchise Expansion - Yum China plans to accelerate franchise development, with franchise stores expected to account for 40%-50% of KFC's net new openings and 20%-30% of Pizza Hut's net new openings [2] - The franchise model is seen as complementary to company-owned stores, helping to expand into new markets and regions [2] - Franchise stores are expected to achieve operating margins comparable to company-owned stores, with strict controls in place to ensure operational quality and food safety [2] Financial Performance and Forecasts - Revenue is projected to grow from USD 11,352 million in 2024E to USD 13,041 million in 2026E, with net income attributable to shareholders increasing from USD 919 million to USD 1,059 million over the same period [6] - The company's EV/EBITDA multiple is expected to decline from 9.9x in 2024E to 8.4x in 2026E, reflecting improved profitability and efficiency [6] Market Sentiment and Valuation - The report highlights a potential upside of 27.3% for Yum China's US-listed shares and 24.3% for its Hong Kong-listed shares based on the target prices [3][4] - The company's market capitalization stands at USD 8,386 million, with a 3-month average daily trading volume of USD 144.9 million [3]

Investment Rating - The report maintains a "Buy" rating for Yum China, indicating a positive outlook for the company's stock performance [5]. Core Views - Yum China demonstrated strong operational efficiency and cost control, with a Q3 restaurant profit margin of 17%, stable year-on-year [2]. - The company plans to increase its shareholder return by 50% from $3 billion to $4.5 billion for the years 2024-2026, with a target of returning $1.5 billion to shareholders in 2024 [4]. - The company is focusing on expanding its franchise model, aiming to increase the proportion of franchise stores from 15-20% to 40-50% in the coming years [3]. Financial Performance - In Q3 2024, Yum China reported revenues of $3.07 billion, a year-on-year increase of 5%, with a system sales growth of 4% [1]. - The operating profit for Q3 was $371 million, reflecting a year-on-year increase of 15%, with an operating profit margin of 12.1% [1]. - The GAAP net profit attributable to shareholders was $297 million, up 22% year-on-year, while the Non-GAAP net profit also stood at $297 million, marking a 20% increase [1]. Store Expansion and Market Strategy - The company opened 438 new stores in Q3, with 145 being franchise stores, representing 33% of the new openings [3]. - As of Q3 2024, Yum China had a total of 15,861 stores, with KFC and Pizza Hut accounting for 11,283 and 3,606 stores, respectively [3]. - The company is leveraging favorable raw material prices and operational efficiency projects to maintain stable profit margins despite pressures on same-store sales [2]. Earnings Forecast - The forecast for net profit attributable to shareholders for FY2024-2026 is $902 million, $978 million, and $1.05 billion, respectively, with corresponding EPS of $2.37, $2.57, and $2.76 [4][9]. - The report projects a P/E ratio of 21, 19, and 18 for FY2024, FY2025, and FY2026, respectively, based on the closing price on November 5 [4][9].