YumChina (NYSE:YUMC)

[Snoopy]

	FY2013	FY2014	FY2015	FY2016	FY2017	FY2018e
Adjusted Normalised NPAT {A}	$284m	$254m	$372m	$474m	$591m	$630m
Revenue {B}	$6,905m	$6,934m	$6.909m	$6,752m	$7,144m	$7,774m
Net Profit Margin {A}/{B}	4.11%	3.66%	5.38%	7.02%	8.27%	8.10%

Inflation in China is around 2%. The smallest gain in margin has been from FY2016 to FY2017. 2% of 7.02% (margin for FY2016) is 0.14 percentage points. That means as long as the FY2017 margin is greater than 7.02% + 0.14% = 7.16%, then our requirement is satisfied. The actual margin is 8.27%, so our requirement is met, and has been met over the FY2017/FY2016, FY2016/FY2015 and FY2015/FY2014 'year on year' comparisons. The decrease in margin over the latest year does not invalidate this company's ability to increase margins for an extended period over the last five years.

Conclusion: Pass Test

SNOOPY