CITIC Securities released a research report saying that maintaining Yum China's (09987) “buy” rating, the 2024Q4 same-store performance is expected to continue to improve under a low base. Against the backdrop of a positive shift in policy downward and rising expectations for potential economic recovery, the company's increased operating expectations are expected to drive further valuation repairs.
According to the report, KFC China announced the launch of price adjustment measures on December 24, with an average increase of 2%, aimed at better adapting to changes in market costs. Judging from history, KFC regularly evaluates and carefully adjusts the price structure based on changes in operating costs. The last price adjustment was in early 2023. The bank's side of this price adjustment reflects the gradual stabilization of popular restaurants after experiencing price competition over the past two years.
Currently, domestic consumer spending intentions are still cautious. The bank expects that under the influence of preferential discounts and product structures, the short-term actual effective price increase may be lower than the increase in menu prices. However, in the long run, the increase in menu prices has a positive effect on maintaining the upward trend in customer unit prices. After the price adjustment period transitions smoothly, the higher price base will also give the company more flexible room to adjust discounts. Prices of 30 products in the Pizza Hut main model have been lowered, but the SKU and overall prices remain different and are developing at the same time as the WOW store. The bank believes that Pizza Hut's adjustments are expected to bring a good “price for volume” effect.
