YUMC - Yum China: Countering Forces Between Negative Momentum And A Solid Business

2024-07-01 09:07:57 ET

Summary

• Yum China is a high-quality business with a decent valuation focused only on Chinese consumers.
• The valuation can potentially become more attractive given the negative momentum and sentiment from the current market.
• The key strategic highlight that will sustain Yum China's high growth level will come from initiatives to capture opportunities across all cities, especially lower-tier ones with currently low penetration rate.

Investment Thesis

Yum China ( YUMC ) is a good business with a stable competitive advantage in the Chinese dinning market. The majority of its earnings are from KFC and Pizza Hut. Growth has been strong as it has been capturing opportunities across cities in China. Differently right now, the majority of these growth opportunities come from what are considered "lower-tier" cities. The scale of such is significant and large enough to support its current high-growth trajectory....

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