A Look at Yum China (NYSE:YUMC) Valuation Following Bold RGM 3.0 Expansion Strategy and Capital Return Plans

Yum China Holdings (NYSE:YUMC) just outlined its RGM 3.0 strategy, unveiling plans to reach 20,000 stores by 2026 and over 30,000 by 2030. Management also reaffirmed its intent to return nearly all free cash flow to shareholders.

See our latest analysis for Yum China Holdings.

Recent momentum for Yum China Holdings has been picking up, with the shares climbing 6.7% over the past month and delivering a 1-year total shareholder return just under 4%. Excitement from the company’s ambitious expansion and a strong earnings beat seems to be fueling optimism, even as longer-term returns remain subdued. Management’s bold growth targets and consistent capital returns are clearly resonating with the market. This suggests that sentiment may be turning more constructive heading into 2026.

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With so much optimism and ambitious growth already telegraphed by management, is Yum China’s current share price still leaving room for upside, or has the market already baked in these future gains?

Most Popular Narrative: 17.2% Undervalued

With Yum China Holdings closing at $48.02, the narrative fair value estimate stands notably higher, highlighting a valuation gap that is getting attention among market watchers.

Continued aggressive expansion into lower-tier Chinese cities and new store formats (including KCOFFEE Cafes and Pizza Hut WOW), combined with healthy new store payback periods, supports ongoing top-line revenue growth and market share gains by tapping into rising urbanization and a broadening middle class.

Read the complete narrative.

What is missing from the headlines? The narrative’s core assumptions pack a surprise: future profits projected on growth levers and ambitious operational targets. Want to know exactly which drivers justify this optimistic price? The details behind this potential re-rating are worth a closer look.

Result: Fair Value of $57.99 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, intensifying competition and rising delivery-related costs could compress margins. These factors pose real challenges for Yum China's long-term growth story.

Find out about the key risks to this Yum China Holdings narrative.

Build Your Own Yum China Holdings Narrative

If you want to weigh in or prefer your own in-depth analysis, it only takes a few minutes to shape your own perspective and Do it your way.

A great starting point for your Yum China Holdings research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.