Luko Technology, a manufacturer of smart locks, has initiated steps to enter the capital markets. On February 6, the company formally submitted its application for a main board listing on the Hong Kong Stock Exchange, with China Galaxy International serving as the sole sponsor. According to research by Frost & Sullivan, Luko ranked fourth globally in smart lock shipments in 2024, with a market share of approximately 2.6%, and third in China, with a market share of about 5.8%.
Based on the prospectus, the company reported revenues of 10.15 billion yuan, 10.86 billion yuan, and 7.74 billion yuan for the first three quarters of 2023, 2024, and 2025, respectively, representing year-on-year growth rates of 7.0% and 11.5%. Net profits were recorded at 140.26 million yuan, 531.13 million yuan, and 319.81 million yuan, with year-on-year increases of 278.7% and 369.2%. Despite the growth in performance scale, Luko's profitability has shown a declining trend. During the reporting period, the company's gross margin dropped from 35.2% in 2024 to 31.2%, while the net margin decreased from 4.9% to 4.1%.
Xiaomi supports 98.5% of the OEM business, while operating cash flow turns negative. The narrowing profit margins highlight the imbalance in Luko's business structure. From the first three quarters of 2023 to 2025, revenue from the company's own-brand consumer products continued to decline, accounting for 31.5%, 27.7%, and 20.5% of total revenue, respectively. Particularly from January to September 2025, the average selling price per unit of its own-brand smart locks fell below the 1,000 yuan mark, decreasing by 18.4% compared to the same period in 2024, while sales volume saw a slight increase of only 0.6%, equivalent to an additional 10,000 units. The pressure on both volume and price directly led to a 19.4% contraction in gross profit from Luko's own-brand consumer products, which accounted for about 30.9% of the total gross profit, down from 43.5% in 2023.
In contrast, the ODM segment supported growth through a strategy of trading price for volume but became the primary drag on the overall gross margin. During the reporting period, sales of smart locks produced under ODM agreements were 753,000 units, 914,000 units, and 1.081 million units, representing cumulative growth of 43.5%. However, the average selling price per unit plummeted from 682.5 yuan to 440.3 yuan, a decline of 35.5% over the period.
In the first three quarters of 2025, ODM sales accounted for 66.2% of Luko's total sales volume and contributed over 60% of total revenue. Nevertheless, the increase in volume could not offset the price decline. Based on gross profit data, the gross profit per ODM smart lock unit was as low as 88.41 yuan, nearly halving year-on-year, with a gross margin of approximately 20.1%, significantly lower than the 46.9% for its own-brand consumer products during the same period.
The prospectus indicates that Luko's largest Customer A is a company listed on the Hong Kong Stock Exchange, primarily engaged in the research, development, manufacturing, and sales of smartphones and smart hardware, and providing IoT platform services. This customer has been procuring ODM products from Luko since 2019. Public information strongly suggests that Customer A is Xiaomi Group.
From the first three quarters of 2023 to 2025, procurement from Xiaomi consistently accounted for over 90% of the total procurement from Luko's top five customers, representing 48.6%, 51.7%, and 60.6% of Luko's total revenue, and approximately 96.0%, 96.9%, and 98.4% of its ODM revenue in the respective periods. In other words, Xiaomi effectively utilizes nearly all of Luko's OEM production capacity, contributing at least half of its annual revenue, which grants Xiaomi a dominant position in price negotiations.
Beyond price pressure, Xiaomi's influence is also evident in extended payment terms. During the reporting period, Luko's trade receivables and notes receivable increased from 196 million yuan to 283 million yuan, a significant cumulative growth of 44.4%. As of January 15, 2026, the total accounts receivable had further risen to 362 million yuan, accounting for 41.3% of current assets. The days sales outstanding (DSO) lengthened considerably, reaching 101 days in the first three quarters of 2025, approximately 1.44 times the 2023 level and 1.22 times the 2024 figure, indicating declining efficiency in working capital recovery.
The cash flow situation also deteriorated. In 2023 and 2024, net cash generated from operating activities was 89.485 million yuan and 1.247 million yuan, respectively, a drastic year-on-year plunge of 98.6%. From January to September 2025, operating cash flow turned into a net outflow of 38.307 million yuan. Cash and cash equivalents at the end of the period plummeted by 57.2% compared to the end of 2024, leaving only 66.733 million yuan. The cash ratio shrank to 0.1%, pushing short-term debt repayment pressure close to a critical point and expanding liquidity risk exposure.
Valuation surged 263-fold over eleven years; Midea, Harvest, and Red Star Macalline have fully exited. Apart from urgent funding needs to improve liquidity, another reason for Luko's rush to list is that the patience of long-term VC/PE investors is nearly exhausted. The prospectus shows that from 2014 to 2025, the company raised a total of 845 million yuan from 26 institutional investors, including Baidu, DT Capital, Guoding Capital, SIG Asia Investments, Shunwei Capital, and Silicon Valley Paradise. Approximately 76.2% of these funds have been utilized. Following the last funding round in November 2025, the company's valuation reached 3.5 billion yuan, about 262.56 times the post-money valuation after the first round.
During this period, six institutional investors—Harvest Investments, Sunship Ventures, Red Star Macalline, LeTV, Midea Group, and Nanjing Iron & Steel—have already exited their positions.
LeTV was the first to exit. Following its financial crisis in late 2016, LeTV quickly transferred all its registered capital in Luko to Harvest Investments, achieving an investment return of approximately 2.03 times. Just two years later, Harvest Investments also exited via equity transfer, selling its stake to Baidu and K2 Venture Partners, realizing 185 million yuan, about 5.29 times its total investment in 2016.
Midea Group exited through a share transfer in September 2017, with the transferees being Shunwei Capital, Xiaomi Group, and Baidu. These three transactions generated a total gain of 27.0309 million yuan, compared to an initial investment cost of about 9.75 million yuan in 2015, resulting in a paper return of 2.77 times. Notably, this marked the first and only time Xiaomi, Luko's largest customer, appeared as an investor, with a transaction value of 9.4737 million yuan. Shunwei Capital, which has strong strategic alignment with Xiaomi, invested nearly 100 million yuan cumulatively between 2017 and 2021, becoming Luko's second-largest external shareholder with a pre-IPO stake of approximately 7.25%, second only to Baidu.
Sunship Ventures, Red Star Macalline, and Nanjing Iron & Steel fully exited between 2021 and 2022. Among them, Nanjing Iron & Steel invested 5 million yuan in 2016 and ultimately realized total proceeds of 40.467 million yuan, an investment return exceeding 8 times. Red Star Macalline invested 15.79 million yuan in 2017 and exited five years later with 63.1784 million yuan, a 4-fold return. Sunship Ventures invested 5.4287 million yuan in 2019 and sold its stake to Guoding Capital in 2021 for 9.5998 million yuan, achieving a modest return of 1.77 times.
Of the remaining 20 institutional investors, more than half of the participating funds or investment platforms were established before 2016 and have entered their liquidation periods, implying foreseeable exit pressure from limited partners (LPs). However, even without an IPO, Fosun Rui Zheng and Lenovo Stars have already achieved substantial returns.
According to available information, Fosun Rui Zheng invested 20 million yuan to become a shareholder in early 2016, with a per-share price of only 5.58 yuan. In the second half of 2018, the institution transferred its registered capital to DT Capital, SIG Asia Investments, and LanTu Venture Capital at a price of 25.53 yuan per share, receiving a total of 57.5 million yuan and realizing a 2.88-fold return. Lenovo Stars invested a total of 5.5862 million yuan between 2014 and 2015. In 2017, it transferred part of its stake to Baidu and Shuanghu Capital for 1.3902 million yuan and 8.3285 million yuan, respectively. In 2021, listed logistics equipment company NuoLi Co., Ltd. acquired approximately 2.7667 million yuan worth of registered capital for 44.0322 million yuan. By this point, Lenovo Stars' project return had reached 9.64 times. As of the latest practicable date, Fosun Rui Zheng held approximately 3.48% of the equity, while Lenovo Stars held about 2.77%.