YUMC

Yum China is the dominant restaurant operator in China — 18,101 KFC, Pizza Hut, and emerging-brand locations across 2,500+ cities, the largest in the country by system sales. FY2025 delivered durable, profitable growth: revenue rose 4.4% to $11.8B, operating income grew 11.0% to $1.29B (operating margin up to 10.9%), and diluted EPS climbed 7.7% to $2.51, outpacing net-income growth thanks to a 6.1% reduction in share count. ROE of 17.3% is strong for a restaurant operator, and the five-year trajectory shows a clean recovery from the COVID-disrupted FY2022 trough ($442M net income) back to a record $929M.

The balance sheet is a standout: liabilities/equity of just 0.87x, minimal debt (current portion only $30M), and $5.38B of equity. The franchise model generates ongoing fees at roughly 6% of system sales, layered on a company-owned base, giving high-quality recurring economics. Crucially, management is returning capital aggressively — $1.14B of buybacks (shrinking shares 6.1%) plus a dividend raised 42.3% to $353M — funded comfortably by $1.47B of operating cash flow against $626M of (declining) capex. This is a self-funding compounder with a long runway for net unit growth in under-penetrated Chinese cities.