Yum China Holdings (YUMC): 3Q26 preview: Softer SSSG but store expansion and PH license fee savings support profits; Buy (on CL)

Yum China is expected to release its 3Q26 results in early Nov. We forecast the company will report sales/restaurant profits/operating profits growth, with KFC/PH same-store sales expected to decline slightly yoy. We expect solid net store openings in 3Q26, further expanding the total store count. On margins, we expect restaurant margin to edge up yoy, driven by savings in the occupancy & other cost ratio thanks to PH license fee savings after the brand acquisition, partly offset by a higher payroll cost ratio (due to higher delivery mix) and a higher Food & Paper cost ratio. We expect group OPM to expand slightly yoy and NPM to contract modestly due to lower interest income. YUMC's share price has pulled back since 2Q26 earnings reported on Jul 30, reflecting market concerns on unfavorable weather and macroeconomic weakness. Despite the sequentially weaker macro backdrop in 3Q26, we expect YUMC can continue to gain share from the market through store expansion and resilient SSG, suppo