Investors should buy Yum China shares as improving sales will drive profit above expectations, according to JPMorgan, which initiated coverage on the restaurant company with an overweight rating.
"We believe there is plenty of scope for Yum China to increase its market share within the fast food segment and thus expand its footprint across the country," analyst Ebru Sener Kurumlu wrote in a note to clients Friday. "The quick service restaurants (QSR) market in China is relatively fragmented and there are opportunities for the leading players to consolidate the market. … Consumers' rising awareness in food safety requires higher investment for quality control and leading players have more resources thanks to their scale."
Yum China has the rights in mainland China for the KFC, Pizza Hut and Taco Bell restaurant brands.