By Megan Cheah


Hong Kong-listed shares of Yum China rose to their highest level in over two years after it posted stronger than expected fourth-quarter results.

The Shanghai-based restaurant operator's stock on Thursday rose as much as 9.0% to 427.80 Hong Kong dollars, equivalent to US$54.76, before paring gains to trade 8.6% higher. Its American depository receipts closed 4.7% higher on Wednesday, after the results.

The company, which operates fast-food chains KFC, Pizza Hut and Taco Bell in China, said its fourth-quarter revenue rose 9.0%, compared with the same period a year earlier, to US$2.8 billion.

Its same-store sales grew 3% on year in the three months, the third consecutive quarter of growth, said the company. Delivery sales expanded 34% on year, with the segment contributing more than half of the company's total sales.

Operating profit margin and restaurant margin improved by 80 basis points and 70 basis points, respectively, said Yum China.

"We are on track to reach over 20,000 stores in 2026 and are targeting more than 30,000 stores by 2030 with an equity-and-franchise hybrid model," said Joey Wat, chief executive of Yum China.

Analysts cheered the results and reiterated bullish calls on the stock, with many citing early signs of improving consumption recovery in China.

The restaurant operator's fourth-quarter results beat Deutsche Bank's expectations across same-store sales growth, net new stores and margins.

DB analyst Han Zhang was upbeat on the company's outlook for same-store sales and system sales to rise by a single-digit percentage in the first quarter. Factoring in this and Yum China's unchanged long-term guidance, she raised her 2026 to 2028 earnings projections by an average of 2%.

Nomura analyst Jizhou Dong expects the restaurant operator to continue to grow steadily this year.

Yum China's strategy to increase franchise stores in lower-tier cities and product innovations for KFC and Pizza Hut are likely to help the company sustain its sales-growth momentum while protecting its profitability, he said in a note.

Still, he flagged some uncertainties such as rising labor costs, which could weigh on earnings over the next two years. He thus trimmed his earnings projections over 2026 to 2027 by 7%-9%.


Write to Megan Cheah at megan.cheah@wsj.com


(END) Dow Jones Newswires

02-05-26 0004ET