UBS On Yum's Path To Recovery...And Beyond

In a report published Wednesday, UBS analysts maintained a Buy rating on Yum! Brands, Inc. YUM, with a price target of $100, following the company's China/India investor presentation.

The analysts expressed their optimism regarding the growth opportunities in both China and India.
In the report UBS noted the key highlights from the China discussion as:

1. Product and marketing (including social and digital) as core to recovery efforts
2. Aggressive focus on coffee as an underpenetrated consumer good
3. Opportunity to optimize pricing sophistication at KFC across cities
4. Higher quality unit growth through more disciplined and resourceful approach to development
5. KFC remodel acceleration without capex risk
6. PH margin/return strength supportive of profit recovery and robust unit growth outlook
7. Underappreciated PH delivery business could eventually provide best returns in the YUM portfolio

The analyst enumerated the key takeaways from the India discussion as:

1. Reversal of difficult macros and investments that have held back profits is coming
2. Business will begin to leverage sales growth with G&A infrastructure in place
3. KFC menu development opportunity remains significant
4. PH delivery investment supports imminent unit growth acceleration
5. Digital competitive advantage positions brands favorably against peers
6. Local sourcing and vertical integration structure proactively help avoid supply chain issues

Upside to Yum! Brands's shares would be supported by a China recovery and optionality, the analysts added.