Goldman Sachs raises YUM China target price to 436 yuan, third-quarter performance shows resilience

Goldman Sachs pointed out that despite the overall weak consumption environment, YUM China (09987.HK)(YUMC.US) showed resilience and stability in its third-quarter performance, meeting expectations. Although last year's base was relatively high, management still aims for same-store sales growth in the fourth quarter to be similar to that of the third quarter. Additionally, the increased proportion of takeout puts pressure on labor costs, but the company can still maintain stable profit margins, thanks to product innovation and continuously improving operational efficiency.

Looking ahead, although there is uncertainty in overall demand, the firm believes that YUM China can further unlock growth opportunities through product innovation and successfully promoting new business models. Furthermore, the company adopts a prudent strategy regarding takeout subsidies, and even if subsidy levels return to normal, the risks it faces are relatively low.

The firm reiterated its "Buy" rating on YUM China, raising the target price for Hong Kong stocks from HKD 413 to HKD 436, and for U.S. stocks from USD 53 to USD 56, while keeping its net profit forecasts for the fiscal years 2025 to 2027 largely unchanged