| Valuation method | Value, € | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 28.10 | -44 |
| Intrinsic value (DCF) | 20.98 | -58 |
| Graham-Dodd Method | 10.00 | -80 |
| Graham Formula | 21.50 | -57 |
Yum China Holdings Inc (0YU.DE) is the largest restaurant operator in China, running a diversified portfolio of fast-food and casual dining brands, including KFC, Pizza Hut, Taco Bell, Little Sheep, and East Dawning. Headquartered in Shanghai, the company operates over 7,500 restaurants across China, serving millions of customers daily through dine-in, takeout, and delivery services. As a leader in China's $700+ billion foodservice market, Yum China benefits from strong brand recognition, localized menus, and an extensive supply chain network. The company's KFC brand dominates China's QSR (quick-service restaurant) segment, while Pizza Hut leads in casual dining. With a workforce of 450,000 employees, Yum China continues to expand its footprint in both urban and lower-tier cities, leveraging digital innovation and delivery capabilities. The company is well-positioned to capitalize on China's growing middle class and increasing demand for Western-style fast food with localized adaptations.
Yum China presents a compelling investment case as the dominant player in China's massive and growing restaurant industry. The company benefits from strong cash flow generation (€1.42B operating cash flow), a healthy balance sheet (€723M cash), and consistent profitability (€911M net income). With a beta of 0.26, the stock offers defensive characteristics in volatile markets. However, investors should monitor risks including Chinese consumer spending trends, wage inflation (given its large workforce), and competition from local chains. The company's expansion into lower-tier cities and digital initiatives (including mobile ordering and delivery) provide growth avenues. The dividend yield (approximately 1.5% based on current share price) adds to total return potential.
Yum China maintains a dominant position in China's restaurant sector through several competitive advantages: 1) First-mover advantage with KFC being the first Western QSR chain in China, 2) Unparalleled scale with over 7,500 locations, 3) Strong supply chain infrastructure tailored to Chinese markets, and 4) Digital leadership with over 400 million members in its loyalty programs. The company's strategy of menu localization (like congee at KFC) differentiates it from global competitors. However, it faces intensifying competition from both global chains expanding in China and local competitors offering more authentic Chinese cuisine at lower price points. Yum China's scale allows for superior unit economics compared to smaller rivals, while its multi-brand portfolio provides diversification across price segments. The company's biggest challenge is maintaining Pizza Hut's relevance amid rising local casual dining options. Its R&D capabilities and ability to rapidly test new products (launching 500+ new items annually) provide a key innovation edge.