NEWS WRAP: Ajisen China tastes success on streamlining campaign

The Japanese-style ramen noodle chain said it returned to the black last year after a two-year overhaul that has produced strong results 

By Teri Yu 

Japanese-style ramen noodle chain Ajisen (China) Holdings Ltd. (0538.HK) said on Tuesday it returned to the black last year after losing money in 2022, as a two-year campaign to make it more efficient bore fruit.

The company said it expects to report a net profit of 160 million yuan ($22.2 million) to 220 million yuan for 2023, reversing a net loss of close to 144 million yuan in the prior year. It achieved the results following an overhaul that resulted in closure of underperforming stores and improved revenue at remaining outlets.

Like most of its peers, customer traffic and sales rebounded for Ajisen after China began lifting its strict Covid restrictions at the end of 2022. As that happened, the company’s revenue for the first half of 2023 rose 30.6% year-over-year to 884 million yuan, even though it had fewer outlets.

The company closed 100 restaurants as of June 2023 across all Chinese cities where it operates, except Hong Kong where it added two restaurants. 

Ajisen recorded a profit of 133.1 million yuan in the first half of last year, also reversing a 106.5 million yuan loss for the year-ago period. The means the latest forecast shows its profit fell sequentially from the first to second half of last year. 

Ajisen’s streamlining approach contrasts with other restaurant operators in China that have embarked on aggressive expansions post pandemic, even as everyone is facing a challenge from China’s slowing economy. One example of the more aggressive approach comes from Yum China, operator of the KFC and Pizza Hut chains in China, which is expanding its footprint to lower-tier cities. 

While it remains to be seen which approach will work best, investor reaction to Ajisen China’s positive profit alert showed some initial confidence in its strategy. The stock spiked 13.6% to HK$1.17 in Tuesday morning trade, though it later gave back some of those gains and closed up 6.8% at HK$1.10, easily beating a 2.6% decline for the broader Hang Seng Index. 

Ajisen China was founded by Daisy Poon who started her career trading Asian ingredients to Europe and the U.S. before she began her new venture to bring ramen-style noodles to the Chinese market. The company opened its first Ajisen restaurant in 1996 serving pork broth ramen that has become popular with Chinese consumers. The company was listed in Hong Kong in 2007. 

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