Hong Kong Stock Review: Quarterly Revenue Hits Record High

The overseas results may not be known until next week at the earliest, but market focus has shifted to domestic meetings, with expectations for larger stimulus measures to boost domestic consumption, driving up sectors such as real estate, finance, and consumer goods today. It has been a month since the last significant rise, and many individual stocks have already given back more than half of their gains, with only those companies with stable or gradually improving fundamentals experiencing less pullback. Particularly in the consumer sector, economic pressure is one factor, but more so the influence of brand and intense competition. Smaller companies tend to have greater profit elasticity, but larger enterprises find it easier to release profits through cost control. For example, YUM China, as previously mentioned, showcased this again in its quarterly report. The company's Q3 revenue grew by 5%, reaching a historical high, with core operating profit increasing by 18% year-on-year, and under share buybacks and cost control, EPS grew by 33%. Although the company added 438 new stores in Q3, same-store sales growth (SSG) only declined by 3%, reflecting consumer stickiness on one hand, and on the other, the company's exploration of more space in lower-tier cities. About 33% of new stores in Q3 came from franchises, and the company expects that in the coming years, the proportion of new KFC/Pizza Hut stores from franchises will increase to 40-50%/20-30%. The KFC brand is already mature and stable, and expanding through franchises allows for better capital utilization. Meanwhile, the development of KFC's coffee brand, Kenuo Coffee, which operates alongside KFC restaurants, is promising, with the number of stores reaching 500, and it is expected to bring additional revenue growth and positive profits at the store level in the future. In contrast, the Pizza Hut brand still needs to rediscover its potential, with Q3 SSG declining by 6%, while KFC's decline was only 2%. Therefore, Pizza Hut has launched a new store model called "Pizza Hut WOW," focusing on affordability, similar to the Salvia model. According to reports, Salvia's operating profit margins for FY2024 are 19.52% in Shanghai, 13.48% in Guangzhou, and 12.56% in Beijing. KFC and Pizza Hut's operating profit margins for the first three quarters were 15.2% and 8%, respectively. If Pizza Hut can maintain its store openings while improving its profit margins to match Salvia's, the profit increment would be significant. Of course, the company's overall SSG has not yet escaped the downward trend, with same-store transaction volume growing by 1% year-on-year in Q3. Although this marks the seventh consecutive quarter of growth, it demonstrates that price competition is fierce, and prioritizing traffic remains the industry's strategy, while SSG fluctuations can easily trigger stock price volatility. Nevertheless, the company has further increased shareholder returns, with the total amount from 2024 to 2026 rising from $3 billion to $4.5 billion, or about $1.5 billion per year, representing an 8% return, which is a significant certainty