November 17th, 2017

Students: Tingliang Guo, Mohan Ru, David Wang Company: Holdings Inc (NYSE: YUMC) Action: Long Price Target: $58 (39% upside) Overview Action: Long | Price Target: $58 | Upside: 39%

Yum China Holdings Inc (NYSE: YUMC) Core Brands (96% of sales): KFC (70% of sales): ~5100 stores ✓ The largest restaurant company in China (26% of sales): ~2000 stores ✓ Brands includes KFC, Pizza Hut, Little Sheep, , East Dawning ✓ Earliest restaurant chain to adopt digital payment in China ✓ Spin off from Yum! Brands (YUM) on Nov 1, 2016 ✓ After the separation from YUM, YUMC will pay a 3% license fee to YUM for the right to sublicense KFC and PH intellectual property in China Other Brands (4% of sales): ✓ Joint headquarters: , China and Plano, TX USA ✓ ~420,000 employees and ~7,300 restaurants over 1000 cities

Capitalization Trading Stats Target Price Share Price (11/10) 41.73 52 Week Hi / Lo 43.5 / 25.5 Target Price $ 58 Total Shares Outs. 385 Implied Valuation Market Cap 16,055 2018 EV / EBITDA 11.1x Consensus Us (-): Cash (1,477) 2019 EV / EBITDA 10.2x 2018 EV / EBITDA 15.7x 13.5x 2019 EV / EBITDA 14.7x 11.0x (+): Debt - 2018 P / E 25.4x (+): Minority Interest 70 2018 P / E 35.9x 28.2x 2019 P / E 22.7x Enterprise Value 14,648 2019 P / E 32.1x 21.7x

1 Source: Company Information, Capital IQ The Western-Style QSR1 Industry in China Highly fragmented industry, rapid growth, KFC dominant, cashless

QSR industry in China is highly fragmented Rapid, sustainable sales growth

KFC largest chain by unit count, followed by McDonald’s Digital + delivery key to competing

2 Source: Company report, McKinsey & Company 1.QSR – Quick Service Restaurant Why Yum China?

1 Store count grows at high-single-digit in a rapidly growing, under-penetrated market (especially in lower-tier cities), increasing margins with operating leverage

2 SSSg improves to mid-single-digit with best-in-class integrated digital + delivery ecosystem – the Domino’s model

3 Local, experienced, and focused management could deliver additional upside from Pizza Hut turnaround

3 1 Historical store growth impressive, but potential even greater Still low penetration in a young, rapidly richer, and urbanizing economy

China’s QSR industry in 10x under-indexed Lower-tier cities further below average

No of Fast Food Chain / MM population, 2016 # of Western QSR / MM population 12 1400 1,263 1200 10 927 1000 8 694 800 6 600 524 Avg = 351 340 4 400 267 223 172 78 2 200 42 17 8 4

0 0

South KoreaSouth Taiwan Japan India

HongKong Thailand

Malaysia Vietnam

USA China

Philipines Indonesia Singapore 24,072 14,926 12,343 10,771 9,671 7,578 5,105 2,279 Avg GDP of City Tiers

QSR penetration correlated with GDP per capita, suggesting China has huge potential to grow GDP per Capita 70,000 USA 60,000 Singapore

50,000 6.0% GDP GAGR => Hong Kong Store # up 10x Japan 40,000 in 10 years Taiwan South Korea 30,000

20,000 China, 2027 China Malaysia Thailand 10,000Vietnam India Philipines 0 0% 5% 10% 15% 20% 25% Chain Restaurants as % Total Restaurant 4 Source: Worldbank, Statista, Broker Research 1 Why does growth matter? Business has significant operating leverage

• Large fixed cost base (eg Significant Operating Leverage Store Count significant driver of cash flow rent) creates significant operating leverage. Growth Costs as % of Revenue Store Count & Restaurant Margins is important to cash flow growth 39% 8000 18% • Expansion into 2nd and 3rd 7000 16% tier cities likely to further 37% lower % occupancy costs, as 6000 14% lower rents support same 35% 12% menu pricing and traffic 5000 10% 33% 4000 8% 3000 31% 6% 2000 4% 29% 1000 2% 27% 0 0% 2013 2014 2015 2016 25%

Store Count Growth

2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 1Q15 Restaurant Margin Occupany Costs Food and Paper Cash Flow % of Revenue

5 Source: company infomrmation 2 YUMC has the most integrated digital ecosystem in QSR

KFC – Leader in digital: - KFC iOS App ranks No 3 in Food and Drink Category (top 2 apps are aggregators). Downloaded 30 million times - Top two QSR brands are KFC and Pizza Hut Benefits: - Deliver SSSg without need to remodel / expand store - Higher margins from savings on labor and other opex - Customer loyalty: 33% of KFC sales comes from KFC members, helped by the launch of KFC Super App - Potential new business model (eg high speed rail sale)

6 Source: aso100.com, company information 2 Why does digital matter in China? The Amazon – retail effect: digital is necessity

China's Cashless Revolution - In 2016, China’s mobile payments hit $9 trillion, roughly 80 times the size of America’s $112 billion market - China’s mobile payment lead due to lack of alternatives (such as convenient credit card) and low denomination of paper currency - Digital strategy lynchpin to success in China, where availability of mobile channels can drive purchase decisions, especially young consumers

7 Source: iResearch, Wall Street Journal 2 Why does digital matter? Case Study - Domino's Pizza in US

The Internet of Pizza – just the latest digital topping for Domino’s (NYSE:DPZ) - Domino’s builds customer loyalty and lowers costs with best- in-class digital tech in US - Between 2006 and 2008 Domino’s Pizza was in crisis – negative SSSg and plummeting sales - Launched app April 2011 - digital sales surpass $ 1 billion within one year. SSSg improves to 10% by 2010 - Immense shareholder value from successful strategy

In US Market

8 Source: Domino’s Pizza company information 3 Strong potential upside from Pizza Hut New management experienced with turnarounds

- Under Joey Wat since 2014, KFC KFC SSSg rebounded from food scandals under Ms. Wat staged impressive turnaround after being hit by food safety Joey Wat took charge of KFC scandals - Joey became YUMC COO in Feb 2017 and will be CEO in March 2018 • KFC’s SSSG improved - Significant knowledge transfer to from -14% in FY13 to 3% Pizza Hut with replicable in FY16 turnaround strategies • KFC’s restaurant margin o Focus on food: slimdown of increased from 11.4% in menu to focus on hits and local FY13 to 16.3% in FY16 favorites Pizza hut is rapidly moving digital following KFC playbook Pizaa Hut SSSg turns positive o Moving to digital: Pizza Hut launched app in July 2017 and has synchronized membership with KFC o New models: store and image upgrade, Bistro - Long-term effort with short-term pain: investors remain in show-me mode. Potential upside as results prove

9 Source: company information 3 How much difference does Pizza Hut turnaround make? Key to Maintain Restaurant Margins

Sensitivty of 2019 EBITDA to Pizza Hut Turnaround Pizza Hut Restaurant Margin in 2018 1554.9064 12.0% 14.0% 16.0% 18.3% 20.0% 22.0% -2.4% 1,693 1,736 1,779 1,829 1,865 1,908 -0.4% 1,731 1,774 1,817 1,866 1,903 1,946 Pizza Hut 1.6% 1,770 1,813 1,856 1,905 1,942 1,985 Avg SSSg 3.6% 1,810 1,853 1,896 1,945 1,982 2,025 2018 5.6% 1,850 1,893 1,936 1,985 2,022 2,065 7.6% 1,892 1,935 1,978 2,027 2,064 2,107 9.6% 1,935 1,978 2,021 2,070 2,107 2,150 11.6% 1,979 2,022 2,065 2,114 2,151 2,194

Sensitivty of Share Price to Pizza Hut Turnaround (Based on 2019 EV / EBITDA) Pizza Hut Restaurant Margin in 2018 12.0% 14.0% 16.0% 18.3% 20.0% 22.0% -2.4% 52.1 53.4 54.6 56.0 57.1 58.3 -0.4% 53.2 54.4 55.7 57.1 58.1 59.4 Pizza Hut 1.6% 54.3 55.6 56.8 58.2 59.2 60.5 Avg SSSg 3.6% 55.5 56.7 57.9 59.3 60.4 61.6 2018 5.6% 56.6 57.9 59.1 60.5 61.5 62.8 7.6% 57.8 59.1 60.3 61.7 62.7 64.0 9.6% 59.1 60.3 61.5 62.9 64.0 65.2 11.6% 60.3 61.5 62.8 64.2 65.2 66.5

10 Valuation – Base Case How we differ from consensus

Our View Consensus Difference 2017E 2018E 2019E 2020E 2017E 2018E 2019E 2020E 2017E 2018E 2019E 2020E Revenue 7,062 7,922 9,160 10,637 Revenue 7,035 7,552 8,059 8,647 Revenue 0.4% 4.9% 13.7% 23.0% % Growth 4.5% 12.2% 15.6% 16.1% % Growth 4.2% 7.3% 6.7% 7.3% % Growth

EBITDA 1,331 1,555 1,905 2,174 EBITDA 1,196 1,332 1,428 1,576 EBITDA 11.3% 16.7% 33.4% 38.0% % Margin 18.8% 19.6% 20.8% 20.4% % Margin 17.0% 17.6% 17.7% 18.2% % Margin

EPS 1.76 2.06 2.69 3.12 EPS 1.42 1.62 1.81 2.14 EPS 24.0% 27.3% 48.4% 45.8% % Growth 29.0% 17.2% 30.2% 16.1% % Growth 4.0% 14.1% 11.7% 18.2% % Growth

Key assumptions: - Store count CAGR: 7% for KFC, 10% for Pizza Hut, hitting managements LT target of 20k stores in 10 years - SSSg: gradual increase on digital + delivery leverage, with KFC converging to Domino’s current SSSg in the next two years - Margins: assume slight leverage on occupancy costs (expansion into lower-tier cities) and labor costs (digital channels) - Capex: assume baseline per-store capex on new stores and remodeling

11 Valuation – Base Case Getting to target price

Methodology Metric Multiple Target Price ($/sh) 2019 EV / EBITDA $1,905MM 11.0x 58 2019 P / E $988MM 23.0x 59 SOTP 2019 EV / EBITDA 9.0x - 14.0x 68 DCF 59 DCF + Idle cash deployment 64

Target price based on 2019 EV / EBITDA multiple, with sense check against other relative and intrinsic methodologies - EBITDA x most appropriate 1) capital structures differ significant due to different franchise vs. owned splits 2) share buyback programs differ across peers - Two-year look-ahead for normalized Pizza Hut earnings post turnaround - SOTP assumes KFC trades up to DM-based QSR multiples, while Pizza Hut trades around Chinese QSR multiples. DCF assumes 9.0% WACC and 3.0% terminal growth rate

12 Potential upside: unlocking value from capital structure Management hints at more productive use of cash

Hypothetical Cash Build without Div / Buyback • Highly cash generative business -> significant cash build without dividend / 8,000 2,000 share buybacks 7,000 • However, management has announced 6,000 1,500 intent to pursue “strategic acquisitions” 5,000 funded by internal cash flows, in addition to 4,000 1,000 share buyback 3,000 • While dividend / buybacks creates no 2,000 500 enterprise value, strategic acquisitions using 1,000 idle cash can provide value upside - - • Additional interest tax shield could result if 2017 2018 2019 2020 2021 2022 YUMC funds buyback with debt Cash Balance Unlevered FCF

Value of Cash Deployment 2017 2018 2019 Share Price Impact Sensitivity @ 2018 EV / EBITDA Free Cash Flow 802 862 1,143 % Post-Div/Buyback Free Cash Flow Deloyed Commit. on Div / Buyback (150) (150) (150) $ 4.26 10% 20.0% 30.0% 40.0% 50.0% Cash to Deploy @ 80% 326 356 497 5.0% 0.2 0.4 0.6 0.9 1.1 10.0% 0.4 0.9 1.3 1.7 2.1 Increment EBITDA @ 20% IRR 136 171 IRR on 15.0% 0.6 1.3 1.9 2.6 3.2 Incremental Value (US$MM) 1,637 1,876 Cash 20.0% 0.9 1.7 2.6 3.4 4.3 Incremental Share Price $ 4.26 $ 4.88 Deployed 25.0% 1.1 2.1 3.2 4.3 5.3 30.0% 1.3 2.6 3.8 5.1 6.4 35.0% 1.5 3.0 4.5 6.0 7.5

13 Source: company information Risk and Mitigants

Risk Mitigants

1. Food safety and supplier risk 1. YUMC added more quality control experts and reduce number of supplier to reduce the food quality issues

2. Labor and food cost inflation 2. High digital adoption and long-term supplier contract mitigates significant cost hikes. YUMC continues to upsell with menu upgrades and premium concept store roll-outs.

3. Customers shift to new healthier food 3. K Pro and Ph+ model are new concept stores providing high-end healthier food

4. Persistent foreign exchange headwinds 4. Macroeconomic stability top priority of current administration, committed to stem persistent capital outflow

14 APPENDIX

15 Income Statement

Income Statement Fiscal Year 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2016 2017 2018 2019 Quarter 1 2 3 4 1 2 3 4 1 2 3 4 Company Sale 1,257 1,563 1,998 2,103 1,391 1,748 2,251 2,374 1,587 2,014 2,614 2,761 6,622 6,921 7,764 8,976 % Growth (1.6%) 0.3% 8.1% 8.5% 10.7% 11.8% 12.7% 12.9% 14.1% 15.3% 16.1% 16.3% (2.5%) 4.5% 12.2% 15.6%

Total Restaurant Costs (968) (1,324) (1,600) (1,764) (1,106) (1,424) (1,767) (1,959) (1,239) (1,605) (2,006) (2,223) (5,610) (5,656) (6,257) (7,074) Food and Paper (345) (453) (575) (610) (401) (501) (645) (688) (458) (578) (750) (800) (1,919) (1,983) (2,236) (2,585) Payroll and Employee Benefits (257) (358) (403) (511) (280) (390) (439) (558) (306) (426) (479) (608) (1,432) (1,529) (1,668) (1,819) Occupancy and Other Operating Expense (366) (513) (622) (644) (425) (532) (683) (714) (476) (602) (777) (815) (2,259) (2,145) (2,354) (2,670)

Restaurant Profit 289 239 398 338 285 324 484 414 348 409 608 537 1,012 1,264 1,507 1,902 % Restaurant Margin 23.0% 15.3% 19.9% 16.1% 20.5% 18.5% 21.5% 17.5% 21.9% 20.3% 23.2% 19.5% 15.3% 18.3% 19.4% 21.2%

Franchise Income 27 31 40 43 30 35 45 49 34 40 52 57 130 141 159 184

Total Operating Costs (62) (127) (121) (154) (99) (121) (156) (172) (112) (140) (182) (197) (502) (464) (548) (631) Franchise Expense (13) (15) (20) (23) (15) (18) (24) (26) (18) (21) (27) (30) (71) (71) (84) (96) General and Administrative Expenses (67) (107) (120) (133) (86) (105) (135) (147) (97) (120) (156) (169) (424) (427) (472) (542) Other Income/expense, net 17 11 22 13 13 13 13 13 13 13 13 13 56 63 51 51 Refranchising Gain, Net 1 1 ------15 2 - - Closures and Impairment Expenses, Net - (17) (3) (11) (11) (11) (11) (11) (11) (11) (11) (11) (78) (31) (44) (44)

Operating Profit 254 143 317 227 216 237 372 292 270 309 478 397 640 941 1,117 1,455 % Operating Margin 19.8% 9.0% 15.6% 10.6% 15.2% 13.3% 16.2% 12.0% 16.6% 15.1% 17.9% 14.1% 9.5% 13.3% 14.1% 15.9%

Interest Income, Net 2 5 6 ------11 13 - - Change in Fair Value of Financial Instruments ------21 - - - Profit before Tax 256 148 323 227 216 237 372 292 270 309 478 397 672 954 1,117 1,455

Provision for Income Tax (76) (35) (102) (66) (63) (69) (108) (85) (78) (90) (139) (115) (158) (279) (324) (422) % Effective Tax Rate (29.7%) (23.6%) (31.6%) (29.0%) (29.0%) (29.0%) (29.0%) (29.0%) (29.0%) (29.0%) (29.0%) (29.0%) (23.5%) (29.2%) (29.0%) (29.0%) Minority Interest (After Tax) 5 6 10 7 7 7 12 9 8 10 15 12 12 28 35 45 Net Income (Loss) 175 107 211 154 146 161 253 198 183 210 325 270 502 647 759 988 % Net Margin 13.6% 6.7% 10.4% 7.2% 10.3% 9.0% 11.0% 8.2% 11.3% 10.2% 12.2% 9.6% 7.4% 9.2% 9.6% 10.8%

Total Revenue 1,284 1,594 2,038 2,146 1,421 1,782 2,296 2,423 1,621 2,054 2,667 2,818 6,752 7,062 7,922 9,160 % Growth (1.5%) 0.4% 8.2% 8.5% 10.7% 11.8% 12.7% 12.9% 14.1% 15.3% 16.1% 16.3% (2.3%) 4.6% 12.2% 15.6%

EBITDA 318 256 425 332 327 348 481 399 385 423 590 507 1,129 1,331 1,555 1,905 % EBITDA Margin 24.8% 16.1% 20.9% 15.5% 23.0% 19.5% 20.9% 16.5% 23.7% 20.6% 22.1% 18.0% 16.7% 18.8% 19.6% 20.8%

16 Balance Sheet and Cash Flow Statement

Balance Sheet Fiscal Year 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2016 2017 2018 2019 Quarter 1 2 3 4 1 2 3 4 1 2 3 4 Current Assets Cash and Cash Equivalents 1,074 892 1,477 1,557 1,418 1,763 2,166 2,336 2,207 2,620 3,115 3,356 885 1,557 2,336 3,356 Short-term Investments 180 310 91 91 91 91 91 91 91 91 91 91 79 91 91 91 Accounts Receivable, Net 68 74 81 111 74 92 119 126 84 106 138 146 74 111 126 146 Inventories 231 266 246 289 190 238 306 326 217 274 355 379 268 289 326 379 Prepaid Expenses and Other Current Assets 169 150 159 188 124 156 201 212 142 180 233 246 120 188 212 246 Total Current Assets 1,722 1,692 2,054 2,236 1,897 2,340 2,883 3,090 2,740 3,271 3,933 4,219 1,426 2,236 3,090 4,219

Non Current Assets Property, Plant and Equipment, Net 1,627 1,617 1,652 1,775 1,755 1,718 1,697 1,832 1,811 1,773 1,751 1,898 1,647 1,775 1,832 1,898 Investment in Unconsolidated Affiliate 37 51 74 74 74 74 74 74 74 74 74 74 71 74 74 74 Deferred Income Taxes 163 166 168 168 168 168 168 168 168 168 168 168 162 168 168 168 Goodw ill 80 103 107 107 107 107 107 107 107 107 107 107 79 107 107 107 Intangible Assets, Net 87 105 104 104 104 104 104 104 104 104 104 104 88 104 104 104 Other Assets 261 287 301 301 301 301 301 301 301 301 301 301 254 301 301 301 Total Assets 3,977 4,021 4,460 4,766 4,406 4,812 5,334 5,676 5,306 5,798 6,438 6,871 3,727 4,766 5,676 6,871

Current Liabilities Accounts Payable and Other Current Liabilities 984 966 1,120 1,286 806 1,038 1,288 1,428 903 1,170 1,462 1,620 971 1,286 1,428 1,620 Income Taxes Payable 84 36 92 77 51 64 83 87 59 74 96 102 33 77 87 102 Total Current Liabilities 1,068 1,002 1,212 1,363 857 1,102 1,371 1,515 962 1,244 1,558 1,722 1,004 1,363 1,515 1,722

Non Current Liabilities Capital Lease Obligations 28 27 28 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28 28 28 28 Minority Interest 50 58 70 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 66 70 70 70 Redeemable Noncontrolling Interests - 5 5 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 - 5 5 5 Other Liabilities and Deferred Credits 251 260 274 274.0 274.0 274.0 274.0 274.0 274.0 274.0 274.0 274.0 252 274 274 274

Total Shareholders Equity 2,580 2,669 2,871 3,025 3,172 3,333 3,586 3,784 3,967 4,177 4,502 4,772 2,377 3,025 3,784 4,772 Total Liabilities & Shareholders Equity 3,977 4,021 4,460 4,766 4,406 4,812 5,334 5,676 5,306 5,798 6,438 6,871 3,727 4,766 5,676 6,871

Cash Flow Statements Net Income 175 107 211 154 146 161 253 198 183 210 325 270 715 759 988 D&A 64 96 105 94 101 99 97 96 104 103 100 99 411 359 394 406 Increase in NWC 58 (88) 214 49 (306) 147 129 107 (333) 165 148 119 (32) 233 76 99 Cash Flow from Operations 297 (59) 407 479 401 (46) 478 573 488 1,229 1,493

Capex (74) (103) (85) (217) (80) (63) (76) (231) (83) (64) (79) (246) (436) (479) (450) (472)

Net Change in Cash 80 (139) 345 403 170 (129) 414 494 241 778 1,020

17 DCF Output Base Case

WACC 9.0% Terminal Grow th Rate 3.0%

Free Cash Flow 2018 2019 2020 2021 2022 Revenue 7,922 9,160 10,637 12,064 13,254 EBITDA 1,555 1,905 2,174 2,442 2,667 EBIT 1,161 1,499 1,768 2,021 2,218 NOPAT 824 1,064 1,255 1,435 1,575 (+): D&A 394 406 406 421 449 (-): Capex (450) (472) (532) (603) (663) (-): Increase in Net Working Capital 76 99 99 99 99 Free Cash Flow 844 1,096 1,228 1,351 1,460 Discounted FCF 809 963 990 999 990 Terminal Value 25,058

Gordon Grow th Method: Sum DCF 2018-2022 4,752 PV Terminal Value 16,286 Enterprise Value 21,038 (+): Net Cash 1,477 Equity Value 22,515 Implied Share Price 58.6

Implied 2018 EV / EBITDA 14.5x

18 Comparable Company Analysis Discount to global QSR brands on lower margin

Yum trades in-line with Chinese QSR peers and at a discount to QSR with predominantly US operations

Price 52 Week Market Enterprise EV / EBITDA P / E ROE Net Margin Company Lcl Low High Cap Value 2018 2019 2018 2019 LTM LTM Yum China 41.7 25.5 43.5 16,055 14,648 11.1x 10.2x 25.4x 22.7x 23.4% 7.4% Chinese QSR Companies Café de Coral 23.8 23.7 28.0 1,786 1,681 11.9x 11.6x 23.1x 22.5x 14.3% 6.4% Xiabu Xiabu 12.1 4.6 12.9 1,669 1,453 11.7x 10.6x 20.4x 17.5x 23.4% 13.3% Mean 11.8x 11.1x 21.7x 20.0x 18.9% 9.9% Median 11.8x 11.1x 21.7x 20.0x 18.9% 9.9% Asian QSR Companies Gourmet Master 360.0 215.5 377.5 1,945 1,796 11.4x 9.5x 23.2x 19.0x 21.5% 7.9% Yoshinoya 1,875.0 1,517.0 2,019.0 1,078 1,166 12.2x 11.4x 51.5x 47.5x 2.2% 0.7% McDonald's Japan 4,825.0 2,930.0 5,130.0 5,663 5,701 #N/A #N/A 27.3x 34.6x 4.9% 2.4% Mean 11.8x 10.4x 37.4x 33.2x 11.8% 4.3% Median 11.8x 10.4x 37.4x 33.2x 11.8% 4.3% Global QSR McDonald's 165.6 114.2 170.9 132,006 156,738 15.1x 14.4x 23.6x 21.8x 191.9% 19.0% Yum Brands 79.6 60.3 81.7 26,821 35,055 17.1x 16.5x 25.1x 21.2x #N/A 15.6% Domino's Pizza 173.3 153.6 221.6 7,580 9,599 15.1x 13.4x 25.2x 21.4x #N/A 8.7% Mean 15.8x 14.8x 24.6x 21.5x #N/A 14.4% Median 16.0x 14.9x 25.0x 21.4x #N/A 12.9%

19 Source: FactSet Forward EV / EBITDA Multiple Evolution Over the Last Twelve Months

17.00x

15.00x

13.00x

11.00x

9.00x

7.00x

5.00x

3.00x

Yum China Holdings, Inc. (NYSE:YUMC) - TEV/Forward EBITDA

Café de Coral Holdings Limited (SEHK:341) - TEV/Forward EBITDA

Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (SEHK:520) - TEV/Forward EBITDA Tsui Wah Holdings Limited (SEHK:1314) - TEV/Forward EBITDA

20 Source: Capital IQ Peer Benchmarking Cost leader with high returns

21 Source: Company Information Chinese QSR tends to be more self-owned than franchised Concern on food safety, capital market efficiency

22 Source: broker research Share Price Evolution Over the Last Twelve Months

23 Source: tmall.com Case Study: Digital + Delivery reinforce brand equity Direct model – owned stores, owned delivery fleet

Consumers value food safety in delivery Own fleet: maximal control over quality… - Unlike other western QSR brand, KFC delivers 100% with own fleet, all while maintaining lower labor costs due to optimal - Dedicated team means KFC can enforce stricter control on food quality, turnaround time, and customer satisfaction, all of which rank highly on delivery preferences - Also helps collect big data on consumer preference, Delivery important to company sale KFC has superb control on labor costs giving KFC an edge in strategically locating new stores in new cities

24 Source: company information, broker research Case Study: Digital enables new growth area Fast food bento on high-speed rail

City rail transit: number of stations

- In July 2017, China Railway High-speed began allowing passengers to pre-book meals online from select external food vendors. Only approved brands will be allowed to list their products on the website and app, and will be subject to food safety supervision by railway authorities - KFC also has physical stores in 250 high-traffic transport hubs (20 high-speed rail stations) with plans for expansion - Brand new growth area with HSR becoming dominant mode of transportation and limited # of competitors Building more high speed trail stations

25 Source: China Railway Corp, broker research T-mall and Ant Financial (Alibaba’s eCommerce & Financial Arms)

Partner with T-mall (the only chain store one T-mall) to drive gift card and cashless payment service$460 million into Yum China. Mobile payment represented 45% of our company sales with other cashless payment as another 15% of sales (Gift card).

Cashless payment reached a record of $1.2 billion in Q3, which is more than 60% of our company’s sales I believe, China is the leader in the world in cashless sales and our company is one of the leaders in China.

Ant Financial Services Group is an online payment services provider. Its platform, Alipay, is the world's largest mobile and online payments platform. Ant Financial, alongside key Alibaba investor Primavera Capital, is investing a total of $460 KFC partner with Alibaba and open store in T-mall (B2C platform) million in Yum China.

26 Source: tmall.com Management Team Experienced local management team; stock price outperform

Ms. Joey Wat is re-designated as President, Chief Executive Officer, Chief Operating Officer, Director of the Company effective March 1, 2018. She has served as the President and Chief Operating Officer of Yum China since February 2017. She served as Chief Executive Officer, KFC from October 2016 to February 2017, a position she held at Yum! Restaurants China from August 2015 to October 2016. Ms. Wat joined Yum! Restaurants China in September 2014 as President of KFC China and was promoted to Chief Executive Officer for KFC China in August 2015.

Mr. Johnson Huang is the General Manager - KFC of the Company. Mr. Huang served as the Chief Information and Marketing Support Officer of the Company from October 2016 to February 2017, a position he held at Yum! Restaurants China from December 2014 to October 2016. Mr. Huang joined YUM in 2006 to lead the information technology department in China, and was named Chief Information Officer in 2013. He became our Chief Information and Marketing Support Officer in 2014 and assumed oversight of a spectrum of functions including IT, Digital, DSC, Marketing Shared Services and Engineering. He has been the key architect of Yum! Restaurants China’s digital strategy and information technology roadmap in China.

Mr. Peter Kao is the General Manager - Pizza Hut Casual Dining of the Company. He has served as the General Manager, Pizza Hut Casual Dining since March 2017. He served as Chief Executive Officer, Pizza Hut Casual Dining from October 2016 to March 2017, a position he held at Yum! Restaurants China from August 2015 to October 2016. Mr. Kao previously served in the position of Senior Vice President & Brand General Manager of Pizza Hut for Yum! Restaurants China starting in 2013 and began leading both Pizza Hut Casual Dining and Pizza Hut Home Service as Brand General Manager in 2008. Mr. Kao has had several leadership positions at YUM, responsible for both Pizza Hut Casual Dining and Pizza Hut Home Service, since 2008.

YUMC outperform S&P 500 and S&P 500 Restaurant since spin-off 27 Source: company information, FactSet SSSg volatility due to one-off events Food quality scandal in 2012 and 2014

A 2014 food safety scandal in China did major damage to the reputations of fast food giants McDonald's and KFC. Yum immediately terminated its global relationship with OSI, which was not a major supplier to the company.

“After an undercover local TV report that alleged workers at Shanghai Husi Food Co Ltd used expired meat and doctored food production dates, regulators closed the factory on July 20. The plant is part of OSI Group LLC [OSIGP.UL], a U.S. food supplier.

OSI, which has close to 60 manufacturing facilities worldwide and had revenue of more than $5 billion in 2012, has been supplying McDonald’s in China since 1992 and KFC and Pizza Hut parent Yum since 2008, according to its website.” - Reuters YUMC’s heavily impacted by food safety incident and US-Sino relationship Since then, YUMC developed comprehensive process to prevent future food scandals and tightened the supplier selection.

28 Source: company information YUM and YUMC - Company History

As of end of 2016, *WCDR - Western Casual Dining Restaurant

29 Source: company information Pizza Hut - Concept stores (PH+) and remodel current stores Pizza Hut's First Robot Restaurant (PH+) Opened in Shanghai

30 Source: company information KFC - K PRO Healthy Eating Concept

YUMC announced on Sep 1, 2017 that it has launched a new restaurant – KPRO in Hangzhou, China.

- Integration of Alipay's new "Smile to Pay" facial recognition payment solution - Offer a fresh, seasonal menu to a new generation of sophisticated diners

31 Source: company information Chinese yuan strength against the U.S. dollar

1Yr - CNY to USD Chart

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