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Yum China: Widening Its Economic Moat And Seizing Growth Opportunities In An Evolving Market
Summary
- Yum China Holdings, Inc. is a leading restaurant company that operates and franchises popular fast-food brands like KFC, Pizza Hut, and Taco Bell in China.
- The company has experienced over a 40% stock price decline over the last year, primarily attributed to softening consumer demand and macroeconomic headwinds that have affected its profitability.
- Despite this, we believe the company is currently undervalued, owing to its strong economic moat and the substantial future growth potential in China.
- This potential will enable the company to serve more customers and improve its consumer mix by penetrating into lower-tier cities across the country.
- Moreover, management is accelerating shareholder returns through share repurchases and cash dividends.
At Three Mile Research we focus on identifying exceptional businesses trading below their intrinsic value. We achieve this by combining fundamental analysis, market research, and common sense; thus taking advantage of market inefficiencies.Our name is inspired by the infamous Three Mile Island accident, regarded as the most severe nuclear disaster in US history. In 1979, the event triggered widespread panic and a significant shift in public perception towards nuclear energy, despite the fact that no fatalities or serious injuries occurred. This paradox of extreme fear without tangible harm mirrors our investment philosophy of finding undervalued stocks that the market has irrationally discounted due to panic or short-term disruptions.
Analyst’s Disclosure:I/we have a beneficial long position in the shares of YUMC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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