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Instant noodle giant aims to boost paltry market share in China with healthy ramen

Key Points
  • Japanese instant noodles maker Nissin Foods wants to grow its business in China
  • Chairman and CEO, Kiyotaka Ando, told CNBC the company will focus on the premium instant noodles segment, which is is still growing at a double digit rate
  • Shares of the company's Hong Kong and China business debuted on the Hong Kong Stock Exchange on Monday
The premium segment in China is key for this instant noodle maker

Japanese instant noodle maker Nissin Foods is unfazed by the shift in China's consumption patterns towards healthier eating as it eyes a bigger share of one of the world's largest consumer markets.

The company plans to dominate the tough Chinese market by focusing on the premium segment, its chairman, chief executive and executive director, Kiyotaka Ando, told CNBC on Monday.

"Some consumers stopped consuming instant noodles, but most consumers want to increase the quality (of food they consume). We can supply high-quality products so we have more possibility to develop our business (in China)," Ando said.

He noted that there has been double digit growth in demand for premium instant noodle brands in the world's second-largest economy, even though consumption of the standard variation of instant ramen plunged 17 percent in 2016.

The company listed shares of its Hong Kong and China business on the Hong Kong Stock Exchange on Monday, after raising $122 million in its initial public offering. The shares fell as much as 12 percent in early trading.

This strategist is taking the long view on noodle maker Nissin

Nissin Foods, founded by Ando's grandfather Momofuku Ando, is the largest instant noodle supplier in Hong Kong with a 65 percent market share based on retail sales value, the South China Morning Post reported last month. The company's heft in Hong Kong pales in comparison with its performance in China, where it has a paltry 2.6 percent market share.

But in the smaller premium segment, the company is the second-largest player with a 20 percent share of the market, behind Chinese firm Tingyi, according to the SCMP.

Kevin Leung, director for global investment strategy at Haitong International Securities, told CNBC the company's long-term prospects look promising, but its valuation looks high.

"For longer term, I think we like what we're seeing because there's still a pretty big growth story in China — that's still a pretty untapped potential," Leung said. "(But) on the valuation side it's still a little bit on the high side."