HK IPO Subscription|Lemo Tech: The leader in massage chairs, but with no cornerstone investors and no greenshoe option. Would you dare to participate?

Unknowingly, it's already the end of November, and it's time for the Hong Kong Stock Exchange to get busy. This time, two come at once, but the quantity is not much. We'll analyze them one by one over two days.

First, let's take a look at the fundamentals of Lemo Technology today.

One-sentence summary

Lemo Technology is a leading operator of shared massage chairs and smart massage services in China. Through the 'direct operation + partner' model, it has deployed over 530,000 devices nationwide, serving high-frequency scenarios such as cinemas, shopping malls, and transportation hubs.

In-depth analysis of fundamentals

The company's main business is self-service massage chair services, with revenue primarily coming from user payments, along with a few B2B clients and advertising business. The brand 'Lemo Bar' has gained high recognition in public spaces. With dense network coverage, consumers frequently encounter it, and most viewers have likely used their products inadvertently.

In 2024, the number of commercial massage chair devices nationwide successfully exceeded one million, maintaining steady growth over the past few years. However, the growth rate has stabilized, and there won't be significant growth in the future.

The company has captured some high-frequency consumption scenarios through the shared massage chair model. Its main competitors are traditional massage equipment companies like Rongtai Health and OGAWA, as well as traditional massage services, such as the 'massage' beloved by veteran drivers.

Financial health assessment

Revenue from 2022 to 2024 was approximately 330 million, 587 million, and 798 million RMB, respectively, with an annualized growth rate of 55%. In the first eight months of 2025, revenue was 631 million RMB, compared to 554 million in the same period last year, a 13% increase, but far below the growth rate of the past two years.

Net profits from 2022 to 2024 were 6.48 million, 87.34 million, and 85.81 million RMB, respectively. In the first eight months of 2025, net profit was 88.55 million RMB, compared to 93.88 million in the same period last year. A dividend payout in 2024 led to a drop in net profit.

Gross margin increased from 25.85% in 2022 to 36.58% in the first eight months of 2025, which is decent.

The debt-to-asset ratio is around 40%, and operating cash flow is relatively ample. The pay-per-use business model and partner model have shared the capital expenditures, giving the company strong cash flow generation capabilities.

Core highlights

1. Machine massage services are a niche consumer service market on the rise. With increasing health and leisure awareness and the recovery of public consumption venues, the company is expected to continue expanding rapidly.

2. The company is the absolute leader in this niche market, consistently holding the top market share with sufficient pricing power and brand premium capability.

3. The sharing economy model has moved past the cash-burning stage, achieving scalable and sustainable profitability while generating healthy operating cash flow, quietly making big money, similar to shared power banks.

Investment risks

1. Shared massage services are highly homogeneous, with competition centered on location. If renewal costs for prime locations rise or are taken by competitors, the company's scale advantage will be challenged.

2. The costs for purchasing and maintaining automatic massage equipment, operational personnel, and equipment depreciation risks are significant. The current depreciation cycle is three years, and technological advancements may accelerate depreciation.

3. The issue price range of 27 to 40 HKD is too wide, entirely at the issuer's discretion, showing a tendency to 'play by ear' and unwillingness to benefit retail investors.

4. No cornerstone investors and no greenshoe option clearly indicate a meme stock route. However, the Fujian group's recent handling of Haixi New Medicine flopped, casting some doubt on this Fujian group's operation.

Final subscription strategy

The issue market cap ranges from 1.5 billion to 2.222 billion HKD. Based on 2025 revenue of 947 million RMB, converted to approximately 1.039 billion HKD, the P/S ratio is between 1.44 and 2.14. The 2025 net profit is estimated at 133 million RMB, roughly 146 million HKD, with a P/E ratio between 10.27 and 15.21.

Overall, if issued at the lower limit, the valuation is relatively undervalued. But if issued at the upper limit, the valuation is just average, given the revenue growth rate is only 13%. This issue price is truly nauseating.

The Hong Kong stock market previously lacked comparable targets. This issue has no cornerstone investors and no greenshoe option, 99.99% likely to follow the meme stock hype route.

CITIC Securities and Shenwan Hongyuan are the sponsors. The former is far from CITIC Brothers, and the latter has been inactive recently. However, for non-second-marriage stocks under Mechanism B, even if Huatai and CICC jointly sponsor, it's not a concern, so the sponsor's influence can be ignored.

The only worry is that the Fujian group's recent handling of Haixi New Medicine flopped, and it will flop again this time is uncertain.

This public offering has a total of 5,556 lots, split equally between Group A and Group B, with a full lottery rhythm. It's estimated that 60% of the funds will go to Lemo Technology. Based on an estimated 180 billion, it's expected to be over 8,000 times oversubscribed.

The winning rate for Group A tail is estimated at 15% to 20%, and for Group B head at 10% to 15%. The hammer rate is around 35%.

Due to the small issue size, if I decide to subscribe in the end, I'll go for Group A tail. The other two small accounts will choose one to go for fafa's Package A.

The above content is based on my analysis of public information and does not constitute professional investment advice. Please think twice before acting.

$LEMO SERVICES(02539.HK)