JPMorgan upgraded Yum China (YUMC) to Overweight from Neutral with a price target of $60, up from $35.50. Consumption sentiment in China has been deteriorating since the May Golden Week Holiday, which has led to lower industry margin and exit of small players, and hence rationalized competition, the analyst tells investors in a research note. As a result, the firm sees sector-wide discounting level narrowing, and market leaders further consolidating the industry. It says Yum China has achieved positive traffic growth for the past seven quarters with year-over-year margin improvement in Q3, which is rare in the retailing industry. JPMorgan believes the company’s fundamentals are “bottoming-out.”
