Buy KFC Stock - Should You Buy Yum! Brands or Yum China Stock?

Yum China Outperformed Yum! Brands

Yum China (NYSE: YUMC, HKEX: 9987) was spin-offed from Yum! Brands in 2016.

Since then, the performance for both stocks has been performing quite well, both are on the uptrends.

However, looking at the overall gain, Yum China has performed better than Yum! Brands by almost 2x times!

This is impressive. 

You can look at the charts below, for the past 1 year, Yum China has gone up by 39.71%, while Yum! Brands has gone up by only 1.38%.

Yum China Valuation

With P/B value of 4.06, this is not a so cheap stock anymore.

PEG is also quite high at 3.44.

P/E is at 32.15.

Debt/Eq position is very healthy, the company has low or no debt.

With dividend yield of only 0.77%, the company is investing back the profits into growth.

The dividend payout is only 12%. 78% is reinvested back to the business for further growth.

While Gross Margin is quite high at 43.10%, the Profit Margin is at 6.10% only.

Note that Yum China is a defensive stock for me. The volatility is lower.

Beta value is also about 0.84 only, lower then the overall market.

Should you buy Yum China right now?

Well, since the recent announcement of a good earnings, the stock has gone up quite high already.

According to some analysis, the stock is currently overvalued though.

Long Term Growth

Below data are from the recent Q4 2020 Quarterly report.

Even though the stock is currently overvalue, I still believe in the long term growth of the company.

Yum China digital sale has been remarkable.

83% of the sales are through digital order.

And 97% are through digital payment.

And there is a huge members base as well - about 59%.

We can see that they are driving through loyalty program.

Look at the impressive digital ecosystem of Yum China here.

Even KFC has its own Super Apps.

We can see that Yum China is focusing on delivery and takeaway. 

Even though in Q1 2020, we know the China was impacted by Covid-19, but we can see that the momentum is gaining traction again.

Now, this is important.

In 2020 alone, Yum China opened 1165 gross new stores.

The company is accelerating in term of their market penetration.

Up to 2020, they have a total of 10,506 stores in China alone! That's crazy a lot of stores and chicken to be served to the Chinese.

With a growing population of Chinese and increasing middle class, this will just spur more growth moving forward.

Why does so many Chinese is flocking to KFC in China?

Well, if you have a nice restaurant, of course you want to spend time there at the restuarant.

And of course, food choices and promotion are the most important of it all.

Look at the varieties and they even have premium burgers, Chinese style congee and nice ice-cream.

Oh man.

They even launched many type of ready meals.

Strategic Plan for 2021

In 2021, Yum China plan to open another 1000 new stores.

We are looking forward for more growth ahead for this company.

Management

Yum China is led by Joey Wat, a successful female CEO.

Yum China is traded in NYSE and HKEX.

For NYSE - look for YUMC.

For HKEX  - look for 9987.

What do you think of Yum China?

Do you plan to invest in it?

Happy Investing! 😉

Reference:

Yum China Spinoff

Yum China - Yahoo Finance

Yum China Earnings

Yum China 9987

Joey Wat

Quarterly Report