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Research Alert: Yum China Q1 In Line; Aggressive Expansion, Digital Growth Support Outlook

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-- CFRA, an independent research provider, has providedwith the following research alert. Analysts at CFRA have summarized their opinion as follows:

YUMC reported Q1 2026 revenue growth of 10% to $3.27B, in line with consensus of $3.23B, with system sales up 4% and steady same-store sales. The quarter featured record store expansion with 636 net openings (39% by franchisees), bringing the total count to 18,737 and supporting the 20,000+ store target by year-end 2026. We view the franchise acceleration as supporting capital efficiency, though benefits may be limited in lower-tier cities due to varying price points and higher customer acquisition costs, in our opinion. Management remains confident in achieving 2026 targets, citing improved delivery platform dynamics and a dual focus on innovation and efficiency. Core operating margin expanded 20 bps to 13.6% for the eighth consecutive quarter, with Pizza Hut gaining 110 bps while KFC fell 20 bps due to its margin-dilutive delivery mix. Digital membership grew 9% to 270M, underpinning customer capabilities. Starting in 2027, YUMC plans to return 100% of annual FCF, translating to $900M-$1B+ annually.

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