On August 17, XIAO NOODLES (02408) released its interim results for the first half of 2026. Demonstrating strategic discipline through a fourth consecutive year of proactive menu price reductions, the company delivered a report card that continues to validate its volume-for-value logic—first-half revenue climbed 33.6% year-over-year, profit for the period rose 51.2%, and total store count reached 550.
The price reduction strategy has once again proven effective: order volume growth continues to outpace the decline in average ticket size, with strong organic growth driven by a price-led volume expansion. Stronger profitability and a more solid cash flow position have enabled the company to pursue more aggressive shareholder returns while continuing its store expansion and digital construction—initiating both dividends and share buybacks in its first year of listing, a rarity in the Hong Kong-listed restaurant sector. Meanwhile, alongside the steady release of commercial value, the company has also launched the "Red Bowl Charity" initiative, building a virtuous cycle from profit growth to shared social value through a long-term oriented mindset.
Performance Delivered: Scale Effects Unlock Profit Growth Far Exceeding Revenue
In 2025, XIAO NOODLES validated the resilience of its business model with an earnings report that exceeded expectations—profit growth outpaced revenue, achieving a doubling in profitability. Entering the first half of 2026, the growth momentum has not slowed. The interim results show the company generated revenue of RMB 939 million, up 33.6% year-over-year; profit for the period reached RMB 63.26 million, up 51.2%; and adjusted net profit stood at RMB 73.059 million, up 40.0%. Profit growth consistently outpacing revenue is the most direct signal of accelerating scale effects, underpinned by systematic cost structure optimization and continuous improvements in operational efficiency.
At the same time, store expansion has accelerated, with scale effects and cost optimization forming a positive feedback loop—as of June 30, 2026, the company operated 550 restaurants, a 31.9% increase from the same period last year; total gross merchandise value (GMV) grew to RMB 1.031 billion. The company expects to open 150 to 180 new restaurants in full-year 2026, having already opened 84 since the end of 2025 as of August 2026, with an additional 93 in the pipeline for opening. Front-end scale expansion and back-end efficiency gains are resonating in tandem, jointly driving the company's profitability to new heights.
Strategic Discipline: Four Years of Consecutive Price Cuts, Validating the Feasibility of Long-Termism Through Volume-for-Value
The sustained profit delivery stems from the company's extreme strategic discipline on the pricing front. From 2022 to 2025, XIAO NOODLES' average order value at directly-operated stores dropped from RMB 36.2 to RMB 29.9, reflecting four consecutive years of proactive reductions. The 2026 interim results further confirm the continuation of this strategy. The announcement shows that same-store average order value declined from RMB 31.3 in the six months ended June 30, 2025, to RMB 27.7 in the six months ended June 30, 2026. While the restaurant industry commonly uses vague language like "responding to market changes" to describe pricing strategies, XIAO NOODLES has chosen to state its position directly with "proactive reduction"—this is not defensive maneuvering but a deliberate, long-term strategic choice.
The core logic behind the price cuts is to exchange extreme cost-effectiveness for a broader customer base, leveraging scale effects to feed back into supply chain efficiency and store-level profitability, creating a positive flywheel of "price cuts—customer traffic—cost reduction—efficiency gains." The growth logic of XIAO NOODLES can be broken down into three main threads: first, securing a premium position in the fast-food segment, where noodles as a national staple food category had a market size of approximately RMB 325.9 billion in 2025, with a CAGR (2025–2029) of 11.0%—a large consumer category with the potential to nurture an industry leader; second, seizing high-energy locations, being among the first to establish a presence in core business districts and transportation hubs in first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen, with Guangzhou and Shenzhen already becoming "hundred-store cities"—while brand momentum continues to accumulate, the company has developed a highly standardized management system across procurement supply chains, site selection and construction, and restaurant operations, laying the foundation for scalable replication; third, optimizing the store model and expanding into lower-tier markets, releasing pricing headroom through continuous cost structure improvements, thereby unlocking incremental growth in down-market cities and achieving simultaneous gains in scale and profitability.
Historical data validates the feasibility of this growth loop. The interim results show that same-store average daily orders per outlet rose from 372 in the year-ago period to 401, an increase of 7.8% year-over-year. According to Guosen Securities research forecasts, at the single-store model level for 2025, the rent cost ratio is expected to improve from 21.1% to 19.9%, labor cost ratio from 18.8% to 17.6%, and store-level net margin from 13.3% to 15.2%. In summary, XIAO NOODLES has offset revenue pressure through refined operations, significantly strengthening single-store profitability and demonstrating greater resilience against economic cycles. By building a customer traffic moat through extreme cost-effectiveness and locking in earnings quality through standardized operations and supply chain depth, the company's competitive barrier is evolving from "a noodle shop" to "a replicable fast-food efficiency platform"—this capability system of "lower prices without lower profits" is the core confidence underpinning its continued realization of scale dividends in the Chinese noodle restaurant segment.
Value Leap: From Business for Good to Shareholder Returns, Red Bowl Charity Opens a New Brand Chapter
This year, XIAO NOODLES officially launched the "Red Bowl Charity" branded public welfare program—allocating a fixed percentage of profits from every bowl of Red Bowl Pea & Pork Noodles to social causes, elevating business-for-good from occasional acts of kindness to a replicable, sustainable long-term mechanism. As the company's best-selling core product, the Red Bowl Pea & Pork Noodles embodies a brand elevation logic of "connecting social warmth through a bowl of noodles": every bowl consumed contributes to broader social value. From "commercial efficiency" to "social value," XIAO NOODLES is completing a strategic elevation of brand depth—business-for-good is not an operating cost but a compounding engine for the continued appreciation of brand trust assets.
The long-term sustainability of philanthropy depends on commercial viability. On the shareholder returns front, the company's actions are equally clear. As of June 30, 2026, the company had used approximately HKD 77.4 million of its own funds to repurchase its H-shares in the market. In the Hong Kong-listed restaurant sector, cases of achieving both "dividends and buybacks" in the first year of listing are uncommon—this not only validates the company's financial strength but also serves as a direct expression of management's confidence in the company's long-term development prospects. From profit doubling to proactive price concessions, and from charity initiation to shareholder returns, the brand narrative of XIAO NOODLES has completed a transition from scale expansion to value creation—commercial and social value are now forming a positive cycle.
In conclusion, amid the highly competitive and saturated restaurant industry, XIAO NOODLES has chosen a more difficult but more solid path—not chasing short-term premiums, but solidifying its customer traffic base through extreme cost-effectiveness; not relying on capital-driven maturation, but locking in earnings quality through standardized operations and supply chain depth. By delivering "dividends and buybacks" in its first year of listing and internalizing business-for-good as a sustainable long-term mechanism, this capability system of "lower prices without lower profits, scale feeding back into efficiency, and commerce creating value" is the core foundation for its continued realization of scale dividends in the Chinese noodle restaurant track.