1、I N D U S T R Y P U L S E|China Restaurants:2025 Q2Stirring up value amid macroeconomic headwinds.J U N E 2 0 2 5Table of ContentsMorningstar Equity Researchhttp:/ DisclosureThe conduct of Morningstars analysts is governed by Code of Ethics/Code of Conduct Policy,Personal Security Trading Policy(or

2、an equivalent of),and Investment Research Policy.For information regarding conflicts of interest,please visit:http:/ SuSenior Equity Analyst,Asia Consumer and InternetI N D U S T R Y P U L S E|C H I N A R E S T A U R A N T S:2 0 2 5 Q 2Industry Outlook:We Expect Gradual Improvement in Growth and Pro

3、fitabilityTop Picks and Valuation:Yum China Looks Very AttractiveExecutive Summary:Mixed Outlook,but Risks Appear Over-DiscountedKey Earnings Drivers:Although Demand Stayed Weak,Lower Input Costs Helped Offset the Impact37I N D U S T R Y P U L S E|C H I N A R E S T A U R A N T S:2 0 2 5 Q 2Executive

4、 SummaryMixed outlook,but risks appear over-discounted.Morningstar Equity Research|4See Important Disclosures at the end of this report.Gauge Indicates Neutral Operating Conditions for Chinas Restaurant IndustryRestaurant GaugeWe are pleased to introduce the inaugural China Restaurant Gaugea compreh

5、ensive indicator that provides a high-level overview of current operating conditions in Chinas restaurant industry.The table below summarizes the current status of five key cost and demand drivers that have the greatest impact on restaurant sales and profitability.For clarity,each factor is weighted

6、 equally in calculating the overall gauge reading.The Reading for the Second Quarter of 2025Persistent macroeconomic weakness,a stable labor market,and steady competitive conditions are balanced by positive trends in commodity prices and rental costs.As a result,the gauge indicates neutral operating