Yum China Holdings Inc (9987.HK) Q2 2025 Earnings Report

Yum China reported QQ2 2025 revenue of $2.787 billion, up 4.03% year over year but down 6.51% quarter over quarter, reflecting typical seasonality in the restaurant sector. The company delivered a solid gross margin of 17.1% and an operating margin of 10.9%, translating into operating income of $304 million and net income of $215 million (EPS $0.58). EBITDA stood at $425 million, and free cash flow generated was $291.8 million, underscoring healthy cash generation despite ongoing capital expenditure needs. The balance sheet remains robust with cash and short-term investments of approximately $2.16 billion, and total liquidity supported by a net debt position of about $1.22 billion (net debt/EBITDA ≈ 2.86x). Management commentary (where available) emphasized continued brand strength, digital channel expansion, and selective store growth, while the absence of explicit quarterly guidance necessitates a cautious view on near-term trajectory given China’s consumer dynamics and competitive intensity.

Key takeaways for investors include: (1) stable top-line growth driven by core brands (KFC and Pizza Hut) and digital/order growth; (2) margin discipline enabling healthy profitability despite input-cost volatility; (3) a strong liquidity runway that supports ongoing store expansion and capex optionality; and (4) a moderation in near-term momentum the quarter, consistent with seasonality, requiring monitoring of SSS trends, cost controls, and return on incremental capital.

Overall, Yum China remains positioned to benefit from a leading brand portfolio and a large, expanding footprint in China, but the stock may face multiple near-term headwinds from consumer softness and competitive dynamics. A cautious stance is warranted until clearer visibility on quarterly cadence and upside from digital initiatives materializes.