Yum China, the well-known restaurateur, experienced a surge in shares in early trading in Hong Kong as the company’s quarterly results surpassed expectations. This positive outcome can be attributed to new store openings and increased consumption activity. Yum China also revealed plans to intensify its buyback program in 2024.
At midday on Wednesday, shares rose by 14.5% to HK$332.00, allowing Yum China to enter positive territory for the year. The company announced that its net profit for the fourth quarter of the previous year increased by 81% to reach US$97 million, outperforming a median analyst estimate of US$61.9 million according to a FactSet poll. Furthermore, Yum China reported a 19% year-on-year growth in sales, totaling US$2.49 billion, which exceeded the FactSet poll’s projection of US$2.32 billion.
In the last quarter, Yum China opened a staggering 542 net new stores. Notably, the company unveiled plans for an aggressive buyback program, an increase in its cash dividend, and a goal of opening up to 1,700 new stores in China throughout this year.
Positive Market Reception
Analysts from Jefferies, Anne Ling and Lisa Liao, acknowledged the remarkable performance in their research note, emphasizing that the bottom line exceeded their expectations. They attributed this achievement to a lower-than-anticipated tax rate and investment loss. Additionally, they lauded the 23% rise in dividend as a pleasant surprise. Jefferies maintained a buy rating with a target price of HK$510.70.
Similarly, analysts Xiaopo Wei and Brian Cho from Citi expressed their confidence in Yum China’s future prospects. They mentioned that the strong results alleviated concerns regarding margin pressure stemming from competition. Citi maintained a buy rating for the stock, setting the target price at HK$573.56.