High profit growth, four years of active cost reduction, and dividend repurchase in the first year: XIAO NOODLES (02408) presents its long-term commitment in its financial report.

On August 17, XIAO NOODLES (02408) released its mid-term performance announcement for the first half of 2026. Under the strategic determination of actively lowering dish prices for the fourth consecutive year, the company has delivered a report that continuously validates its volume-price logic with revenue growing by 33.6% year-on-year in the first half, profit increasing by 51.2% year-on-year, and a total store count reaching 550. The effectiveness of the price reduction strategy has been reconfirmed: the order growth rate continues to outpace the decline in average transaction value, indicating strong internal growth driven by volume-driven pricing. Stronger profitability and more solid cash flow have enabled the company to support larger shareholder returns while continuing to promote store expansion and digital development a rare occurrence in the Hong Kong stock beverage sector, which includes dividend distribution and share buybacks in its first year of listing. Meanwhile, as commercial value is steadily released, the company has simultaneously launched the "Red Bowl Public Welfare" project, constructing a positive virtuous circle from profit growth to co-creation of social value with a long-term perspective. Performance validation: Scale effects released profits growing significantly faster than revenue. In 2025, XIAO NOODLES validated the resilience of its business model with results that exceeded expectations profit growth far outpacing revenue, achieving a doubling increase. Entering the first half of 2026, the growth momentum remains strong. The mid-term performance announcement shows that the company achieved revenue of 939 million RMB, up 33.6% year-on-year; profit for the period was 63.26 million RMB, up 51.2% year-on-year; and adjusted net profit was 73.06 million RMB, up 40.0% year-on-year. The continuous outperformance of profit growth over revenue is the most direct signal of accelerated scale effects being released, driven by systematic optimization of cost structure and ongoing improvements in operational efficiency. At the same time, the pace of store expansion is accelerating, forming a positive cycle between scale effects and cost optimization as of June 30, 2026, the total number of restaurants has reached 550, a year-on-year increase of 31.9%; the total gross merchandise volume (GMV) has grown to 1.031 billion RMB. The company expects to open 150 to 180 new restaurants across 2026, and as of August 2026, it has opened 84 new restaurants since the end of 2025, with another 93 in preparation for opening. The resonance between front-end scale expansion and back-end efficiency improvements jointly drives the company's sustained profitability rise. The dual engine of scale expansion and efficiency improvements is propelling XIAO NOODLES toward a higher quality growth trajectory, accelerating the realization of the capital value of a high-growth catering leader. Strategic determination: Four consecutive years of price reductions validate the feasibility of long-termism through "price for volume." The continuous profit realization stems from the company's extreme strategic determination regarding pricing. From 2022 to 2025, the average consumption per order at XIAO NOODLES' directly operated stores dropped from 36.2 RMB to 29.9 RMB, showing an active reduction for four consecutive years. The mid-term performance announcement for 2026 further validates the continuation of this strategy. The announcement shows that the average consumption per order for same-store sales dropped from 31.3 RMB for the six months ending June 30, 2025, to 27.7 RMB for the same period ending June 30, 2026. While the restaurant industry typically uses ambiguous phrasing such as "responding to market changes" in discussing pricing strategies, XIAO NOODLES directly states its intention to "proactively lower" prices this is not a defensive move but rather a long-term strategic choice made after careful consideration. The core logic of the price reduction is to exchange extreme cost performance for a broader customer base, allowing the scale effect to reciprocate through improved supply chain efficiency and restaurant profitability, forming a positive feedback loop of "price reduction attracting traffic cost reduction increasing efficiency." XIAO NOODLES' growth logic can be broken down into three main lines: first, capturing the premium fast food sector, as noodles are a national-level consumer category, with the market size expected to reach around 325.9 billion RMB by 2025 and a CAGR of 11.0% from 2025 to 2029, indicating substantial market potential for leading players; second, seizing high momentum positions by first establishing a presence in core business districts and transportation hubs in first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen, the latter two having respectively become "cities with hundreds of stores." While continuously accumulating brand momentum, the company has formed a highly standardized management system across various sectors including procurement supply chain, site selection, and restaurant operations, laying the groundwork for scalable replication; third, optimizing the model and penetrating stores by continuously improving the cost structure to release space for price reduction and thus open up incremental opportunities in lower-tier markets, achieving a two-way enhancement of scale and profit. Historical data has confirmed the feasibility of this growth loop. The mid-term performance announcement shows that the average daily order volume per same-store increased from 372 orders in the same period last year to 401 orders, a year-on-year increase of 7.8%. Research from Guosen predicts that by 2025, in terms of the single-store model, the rent cost rate will improve from 21.1% to 19.9%, labor cost rate will decrease from 18.8% to 17.6%, and the net profit margin at the store level will rise from 13.3% to 15.2%. In conclusion, XIAO NOODLES has countered revenue pressure through refined operations, significantly enhancing single-store profitability, showcasing greater resilience against cyclicality. By constructing a moat of customer flow with extreme cost performance and leveraging standardized operations and supply chain depth to lock in profit quality, XIAO NOODLES competitive barrier is evolving from "a noodle shop" into "a replicable fast food efficiency platform" this capability system of "reducing prices without reducing profits" is at the core of its sustained realization of scale dividends in the Chinese noodle shop market. Value leap: From benevolent business to shareholder returns, the Red Bowl Public Welfare project opens a new chapter for the brand. This year, XIAO NOODLES officially launched the "Red Bowl Public Welfare" brand public project extracting a fixed percentage of profit from each bowl of red bowl noodle soup for social welfare, upgrading benevolent business from sporadic good deeds to a replicable and sustainable long-term mechanism. As the company's best-selling core product, red bowl noodle soup carries the brand elevation logic of "connecting the social warmth with each 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 seeing benevolent business not as an operating cost, but as a compounding engine that continually increases brand trust assets. The sustainability of public welfare is inseparable from commercial sustainability. In terms of shareholder returns, the company's actions are equally clear. As of June 30, 2026, the company had utilized approximately 77.4 million HKD of its own funds to repurchase its H shares on the market. There are not many cases in the Hong Kong stock beverage sector that achieve a "dividend + repurchase" combination in the first year of listing, which not only validates the company's financial strength but also directly reflects the management's confidence in the company's long-term development prospects. From doubling profits to proactively granting benefits, followed by launching public welfare and shareholder returns, XIAO NOODLES brand narrative has successfully transitioned from scale expansion to value creation commercial value and social value are forming a positive cycle here. In summary, at a time when the restaurant industry is highly competitive, XIAO NOODLES has chosen a harder yet more solid path not chasing short-term premiums but solidifying the customer base with extreme cost performance; not relying on capital to fast-track growth, but locking in profit quality through standardized operations and supply chain depth. By delivering "dividend + repurchase" in its first year of going public and internalizing benevolent business into a sustainable long-term mechanism, this capability system of "reducing prices without reducing profits, scale supporting efficiency, and business creating value" is where its core strength lies in consistently realizing scale dividends in the Chinese noodle shop sector.