Lemo Technology – Building a Shared Massage Leader with 530,000 Devices, Profitability Challenges Amid Scale Expansion

ZC Asia has learnt that the Hong Kong Stock Exchange's Main Board is poised to welcome a leading enterprise in a niche sector. Lemo Technology commenced its initial public offering on 25 November 2025, planning to issue 5,555,600 shares at an indicative price range of HK$27-40 per share, with trading expected to commence on 3 December.

According to Frost & Sullivan data, Lemore Technology has ranked first in China's robotic massage service market by transaction value for three consecutive years (2022 to 2024). In 2024, the company captured a 42.9% market share with transaction value reaching RMB1.2 billion, while its revenue scale hit RMB798 million, accounting for over 50% of the market's total revenue.

Profitability Concerns Behind Scale Leadership

Despite revenue growth from RMB 330 million in 2022 to RMB 798 million in 2024, the growth rate of adjusted net profit has noticeably slowed. In 2024, the company's adjusted net profit stood at RMB 102 million, growing by a mere 7.85% – a sharp contrast to the explosive growth seen in 2023. This trend became even more pronounced in the first eight months of 2025: while revenue reached RMB 630 million (a 13.72% year-on-year increase), adjusted net profit was RMB 99.187 million, representing a meagre 0.92% year-on-year growth.

The decline in gross profit margin is a key factor behind the profit pressure. In 2023, the company's gross profit margin surged from 24.66% to 41.47%, but fell back to 36.07% in 2024. This was primarily due to increased service outlet usage fees and costs for new massage equipment, rising operational and maintenance personnel expenses, and a higher proportion of revenue from the lower-margin direct operation model.

The Dual-Edged Sword of Direct Operation Dominance

Lemo Technology operates through a dual-track model of ‘direct operation + city partners,’ though direct operation holds absolute dominance. As of 25 November 2025, the company had established over 48,000 service points, deploying 533,000 massage machines across China's 31 provincial-level administrative regions.

Of these, 70.4% of service outlets operate under the direct-operated model, which contributed 83.49% of revenue in the first three quarters of 2025.

While the direct operation model facilitates control over service quality and site resources, the company bears substantial costs including venue rentals, equipment depreciation, and maintenance. Consequently, the gross profit margin for direct operations remains significantly higher than that of the partner model, which can transfer most costs. This capital-intensive nature has constrained the company's overall profitability.

Mismatch Between Site Deployment and Revenue

Lemo Technology's equipment deployment strategy also reveals efficiency challenges. The company prioritises high-footfall locations such as shopping centres, cinemas, and transport hubs, yet revenue performance varies significantly across different scenarios.

Prospectus data indicates relatively high average daily transaction volumes in commercial complexes, airports, and high-speed rail stations, whereas cinema venues exhibit markedly lower figures: 0.17, 0.30, and 0.18 transactions per day in 2022, 2023, and 2024 respectively.

Notably, massage pads accounted for 80.8% of Lemo Technology's total deployed equipment in 2024, with cinemas being their primary deployment setting. This indicates the company allocated the most equipment resources to cinema settings, which recorded the lowest average daily transaction volumes.

The shared massage industry has undergone a cycle from capital frenzy to rational adjustment. The sector entered a period of rapid expansion in 2017, but enthusiasm waned significantly by 2019 due to low utilisation rates and safety concerns.

From 2020 to 2023, amid industry consolidation and the impact of the pandemic, China's smart massage service market size grew only marginally from RMB 2.34 billion to RMB 2.44 billion, representing near-stagnant growth.

LeMo Technology navigated the industry downturn through measures including executive pay cuts and the founder pledging personal property for funding, initiating rapid expansion post-pandemic. The company's service outlets grew from 21,727 at the end of 2022 to 45,993 by the end of 2024, achieving a compound annual growth rate of 45.49%.

Proceeds from this listing will be allocated as follows: approximately 60% for expanding service coverage to enhance penetration in established venues such as high-speed rail stations, airports, shopping malls, and cinemas, alongside overseas market expansion; around 20% for technological upgrades; roughly 10% for brand development; with the remaining 10% earmarked for operational capital.

For Lemo Technology, identifying new growth trajectories is paramount. In 2024, revenue from shared massage services accounted for a substantial 98.11% of total income, reflecting a relatively singular monetisation model. Against the backdrop of ongoing pressure from scale expansion eroding profitability, balancing expansion pace with current earnings and achieving diversified revenue streams will prove critical in determining the company's long-term value.

Disclaimer: The content herein is for reference only and does not constitute any form of investment advice. Should any information contained herein prove inaccurate, incomplete, or potentially misleading, please refer to the company's official announcements. Market risks exist; investment requires caution.