The leading Chinese shared massage chair company, Lemo Services (02539.HK), continued its recent downtrend on Wednesday (25th), with weak trading activity and a sluggish share price throughout the session. The stock closed at HK$7.2, down 13.25% and setting a new closing low. At this price, the shares have fallen 82% from their HK$40 per share IPO price and have plunged over 91% from their all-time high, joining the ranks of Hong Kong-listed new stocks that have suffered severe declines from their peaks.

The stock currently trades at a TTM P/E ratio of 3.85x and a P/B ratio of 0.72x, indicating historically low valuations. Liquidity is notably weak, with the day's turnover at just HK$406,500 and a turnover rate of only 0.24%, reflecting tepid market interest and a lack of buying support.

This current lack of interest stands in stark contrast to the intense demand during the company's IPO. The Hong Kong public offering was oversubscribed by 7,324.29 times, and the international offering was oversubscribed by 6.78 times. The global offering comprised 5.5556 million H shares, with 10% allocated to the Hong Kong public offering and 90% to the international offering. The final offer price was set at HK$40 per share, raising net proceeds of approximately HK$182 million.

Lemo Services officially listed on the Hong Kong Stock Exchange on December 3 last year, closing up 36.78% on its debut. The stock reached its peak on the fourth trading day, hitting an all-time high of HK$84.42 per share. However, market optimism quickly reversed thereafter. Investors began selling off their holdings, initiating a sustained downtrend for the stock.

By December 29, less than a month after listing, the share price had already fallen below the IPO price. Compared to other recent Hong Kong listings, Lemo Services' period of positive performance was exceptionally brief. The stock also experienced a flash crash on February 5 this year, plummeting shortly after the market opened and closing down over 40% for the day. This event severely damaged investor confidence, leading to a prolonged period of volatile decline.

Examining the Business Model and Financials

Information shows that Lemo Services provides massage services through machines located at service points in high-traffic public areas across China. According to Frost & Sullivan data, based on transaction value, the company ranked first in China's machine-based massage service market for three consecutive years from 2022 to 2024, with market shares of 33.9%, 37.3%, and 42.9% respectively for those years. By revenue, the company held the top market share in China in 2024, exceeding 50%, far surpassing other market participants and earning it the title of industry leader.

Analysis suggests the stock's persistent weakness and deep decline are not due to short-term sentiment swings, but rather a confluence of negative factors including structural flaws in its business model, weakening fundamental growth momentum, inherent shortcomings in its listing structure, limited industry growth potential, and negative liquidity feedback loops.

Financially, total revenue for the years ended December 31, 2022, 2023, and 2024 reached RMB 330 million, RMB 587 million, and RMB 798 million, respectively, representing year-on-year growth rates of 77.75%, 35.98%, and 13.80%. Annual profits were RMB 6.481 million, RMB 87.34 million, and RMB 85.807 million, respectively.

In 2025, Lemo Services reported revenue of RMB 907 million, a 13.63% increase year-on-year, and a net profit of RMB 93.73 million, up 9.23%. At first glance, these figures showing both revenue and profit growth appear solid. However, underlying concerns exist. From 2022 to 2025, the company's revenue growth rate has declined annually, plummeting from 77.75% in 2023 to 13.63% in 2025, a clear signal of deceleration. Gross margin has also declined year-on-year, from 41.79% in 2023 to 33.67%.

Challenges in Operations and Market Positioning

Operationally, Lemo Services employs a "direct operation + partner" model and segments its services through online and offline channels to expand brand reach and enhance user stickiness. Analysis points out that the company's core business of shared smart massage equipment is a typical offline, asset-heavy model with high fixed costs and low per-customer transaction values. This model inherently has a profitability ceiling, as scale expansion does not translate into economies of scale.

Data shows the company operates 100,000 massage chairs and 440,000 massage pads. On the cost side, it bears long-term fixed expenses such as equipment depreciation, venue rentals, operation and maintenance, and location channel commissions. However, the per-customer price is locked in a low range of RMB 6-15, and monthly revenue per device has a clear upper limit. The larger the scale, the greater the pressure to spread fixed costs, creating a cycle where "more expansion leads to thinner profits." The decline in gross margin from 41.79% in 2023 to 33.67% in 2025 illustrates how expansion directly erodes profitability.

There is also a significant imbalance in location strategy. Over 80% of the company's devices are placed in cinemas, which contribute only 26% of revenue. Cinemas represent a low-frequency, short-duration, weak-demand scenario where user willingness to pay for a massage is minimal, leading to high idle rates for equipment. Annual revenue per device in cinemas is only a few hundred yuan. In contrast, high-potential locations like shopping malls and transportation hubs are scarce, have high rental costs, and are difficult for the company to penetrate at scale. This results in a low overall return on assets, with a large portion of fixed assets becoming inefficient and burdensome.

Furthermore, shared massage is a non-essential, fragmented experience-based consumption with strong discretionary spending characteristics. In a weaker consumer environment, users tend to cut back on non-essential small-ticket experiential expenses first. This lack of rigid demand support for the industry leads to insufficient revenue stability.

Industry and Valuation Concerns

From an industry perspective, analysis indicates the overall size of China's shared massage equipment sector is relatively small. The niche market capacity cannot support the growth valuations expected of a listed company, and the industry's long-term growth potential is already fully priced in by the market. Simultaneously, traditional health equipment giants are gradually exiting the shared space, reducing the sector's capital attractiveness and contributing to a continuous downward re-rating of the overall valuation framework.

Additionally, long-standing market skepticism regarding the authenticity of the company's reported offline device deployment data continues to undermine confidence in the credibility of its asset and revenue figures, further suppressing market risk appetite and causing capital to avoid the stock.

Regarding its listing structure, some analysis suggests Lemo Services' IPO had inherent flaws. It did not introduce long-term cornerstone investors with lock-up periods, nor did it implement a greenshoe option for price stabilization, representing a typical "naked listing." The initial surge to HK$84 was fueled by retail investor frenzy. Once sentiment cooled, there was no institutional buying to provide support, and profit-taking sellers found no counterparties, leading to the sustained downtrend.

The IPO price of HK$40 corresponded to a static P/E ratio exceeding 20x, which represented a severe overvaluation for a niche, low-growth shared economy segment. As market rationality returned, capital continued to de-rate the valuation. The current TTM P/E of just 3.85x shows the valuation continues to decline without clear support.

The stock has now entered a negative cycle characterized by low liquidity, weak buying support, and persistent decline. Secondary market performance shows consistently anemic trading, with daily turnover and turnover rates remaining at extremely low levels, indicating nearly exhausted market activity. This liquidity drought means market absorption capacity is minimal, allowing even small selling pressure to trigger significant price drops. The stock's price elasticity has deteriorated, with no clear signs of stabilization in sight.