Tam Jai International’s First Results After Listing: 157 Stores and HK$1.18 Billion in Half-Year Revenue

This is an English adaptation of a FoodBud historical article originally published on November 15, 2021.

For the six months ended September 30, 2021, Tam Jai International reported revenue of HK$1.18 billion, about RMB 970 million, up 43% year on year. Adjusted profit for the period was HK$150 million, up 107.8% year on year.

Market Context

China’s National Bureau of Statistics reported that in October 2021, national foodservice revenue reached RMB 446.0 billion, up 2.0% year on year. Foodservice revenue from above-designated-size enterprises was RMB 97.6 billion, up 4.0%.

For January to October 2021, national foodservice revenue was RMB 3.7211 trillion, up 25.7%; above-designated-size foodservice revenue was RMB 853.6 billion, up 30.4%.

According to the China Cuisine Association, October growth in national foodservice revenue and above-designated-size foodservice revenue was respectively 1.2 percentage points higher and 2.1 percentage points lower than the same period in 2020, and 7.0 and 1.6 percentage points lower than the same period in 2019. For January to October, those growth rates were 46.7 and 48.2 percentage points higher than the same period in 2020, and 16.3 and 23.3 percentage points higher than the same period in 2019. Foodservice accounted for 10.4% of total retail sales of consumer goods, with growth 10.8 percentage points higher than overall retail sales.

Against a difficult mainland foodservice backdrop, Hong Kong rice-noodle chain Tam Jai International released its first financial report after listing. After the results were announced, its share price rose sharply and then pulled back. At the time, the company’s market capitalization was HK$4.28 billion.

Tam Jai International is a self-operated restaurant chain focused on rice noodles. It operates two brands: TamJai Yunnan Mixian and TamJai SamGor Mixian. The first restaurant under the Tam Jai name opened in 1996, giving the brand a 25-year operating history by 2021. The company listed in Hong Kong in October 2021.

The Three Major Cost Lines: Rent, Labor, and Ingredients

For the six months ended September 30, 2021:

• Ingredient costs were HK$270 million, or 22.6% of revenue.
• Employee costs, including restaurant, central kitchen, headquarters, and office staff, were HK$360 million, or 30.3% of revenue.
• Depreciation of right-of-use assets, rent, and related expenses were HK$190 million, or 16.0% of revenue.

Store Network: 157 Restaurants

In April 2021, Tam Jai International opened four new stores in Shenzhen. As of September 30, 2021, it operated 157 stores in total.

Hong Kong was the company’s core revenue market. The four newly opened Shenzhen stores generated HK$11.675 million in revenue during the six-month period.

Tam Jai International’s revenue mix showed dine-in accounting for 57.1%, while takeaway, self-pickup, and delivery accounted for 42.9%.

Average check by market:

• Hong Kong: HK$59.5
• Mainland China: HK$61.8
• Singapore: HK$85.0

Average daily revenue per restaurant:

• Hong Kong: HK$43,546
• Mainland China: HK$30,643
• Singapore: HK$19,494

Mainland China’s Noodle Segment Remained Active

FoodBud compared Tam Jai International’s 157-store base and RMB 970 million in half-year revenue with several popular mainland noodle-chain projects.

According to the latest announcement from Juewei Food, Hefu Noodle generated RMB 1.1 billion in revenue in 2020 and RMB 850 million in the first half of 2021. It turned profitable, with net profit of RMB 13.857 million.

As of the end of June 2021, Hefu Noodle had more than 340 stores nationwide. Its average monthly store revenue was RMB 550,000, sales per ping were RMB 4,800 per month, labor efficiency was RMB 55,000 per month, and average check was RMB 45. Hefu’s daily sales had exceeded 150,000 bowls of noodles, with annual customers served above 50 million.

In the 1-to-30-store stage, Hefu Noodle found profitability difficult. In the 30-to-100-store stage, its ingredient-cost control began to show, with ingredient costs falling from 35% to about 25%. After scaling, average cost across the full product line was 22% to 23%, helped by production-process improvements.

Rent accounted for as much as 26% of Hefu Noodle’s total cost. As brand awareness increased, malls began inviting the brand in, rent became negotiable, and some landlords even waived base rent in favor of a sales-commission model. In 2019 and 2020, rent cost was controlled at about 16%, while overall net profit was about 15%. Shanghai and Beijing had the highest contribution rates, with net profit in both markets at about 18%.

Another closely watched noodle-chain project, Meet Noodles, generated RMB 290 million in revenue in 2020, up 105.6% year on year.

The open question at the time was which leading mainland noodle player would be first to list.

Note: IPO, market-capitalization, share-price, and financial figures are historical as of the article’s November 15, 2021 publication context.