New Stocks Outlook | Scarcity in Profit Performance vs. Dependence on a Single Supplier, Can Green Cloud Software Tell the Story of the Hotel "Brain" Well?

The "brain" of China's hotels is coming to Hong Kong for an IPO. On February 20, the first day of trading in the year of the horse for the HKEX, Lyun Software, which is seen as the "brain" of China's hotels, actively knocked on the door of the Hong Kong Stock Exchange, planning to list on the main board of Hong Kong, with CICC as the sole sponsor. The reason why Lyun Software is seen as the "brain" of hotels is mainly because of the company's PMS system. PMS stands for Property Management System, which can be understood as the backend operational hub of a hotel. Front desk staff daily operations, such as check-in, room changes, check-out, and room rate settlement, all rely on it. In terms of sales volume and number of rooms covered, Lyun Software is the largest PMS supplier in China's accommodation industry in 2024, with market shares of 16.8% and 16.3% respectively. As of the end of September 2025, the company had provided PMS to more than 37,000 hotels in China. Not only that, after more than a decade of focusing on digitalization in the accommodation industry, Lyun Software's client list is impressive- Domestic leading hotel management groups such as Jinjiang Group, Radisson, and Juntian, international giants such as Marriott, InterContinental, Accor, and Wyndham are all using its system. In addition to hotels, the company's solutions and services have also been widely used in the cultural tourism industry, such as Songzan Group, Anaya, Mediterranean Borderlands and Mediterranean Sun Ark. What is the investment value of such a leading company in this niche industry? Fundamental Strength: Scarce Profit Performance, Strong Industry Certainty As the global accommodation industry market size accelerates its development and the share of digital expenditure continues to increase, digitalization in the accommodation industry is a high-growth track with high certainty. According to the Zhoushi Consulting report, the digitalization market size of China's accommodation industry is expected to reach 9.02 billion RMB in 2029, with a compound annual growth rate (CAGR) from 2024 to 2029 of 12.6%. Among them, the PMS, as the core system, is also expanding at the same time, with the market size expected to reach 3.52 billion RMB by 2029, with a CAGR of 10.9%, providing a stable base for core service providers like Lyun. Under a stable market backdrop, Lyun Software, as an industry leader, has also accumulated significant competitive advantages. The company has established a cloud-based product ecosystem with PMS as the core, which the company calls the Lyun CloudChain. The "cloud" reflects the cloud deployment mode of software modules, while the "chain" refers to the seamless connection between modules through APIs. These systems work together to enable hotels to manage cross-channel orders, guest data and interactions, as well as revenue and settlement processes in an integrated manner. By connecting front-end and back-end operations and applications for staff and guests, Lyun Software's solutions provide customers with comprehensive digital infrastructure. According to the prospectus, from 2023 to September 2025, Lyun Software achieved revenues of 337 million yuan, 327 million yuan (a decrease of 2.97% year-on-year), and 225 million yuan (an increase of 2.74% year-on-year) respectively. Looking at the breakdown of revenue, Lyun Software's revenue from accommodation industry digital solutions in the first nine months of 2025 was 180 million yuan, accounting for 80.1%; revenue from digital marketing services was 28.99 million yuan, accounting for 12.9%. Although revenue performance is fluctuating, the company's profitability is quite impressive. From 2023 to September 2025, Lyun Software achieved profits of 73.85 million yuan, 68.97 million yuan, and 34.57 million yuan respectively. According to the prospectus, among the top five accommodation industry digital service providers in China, Lyun is the only company that has been profitable every year for the past five years and has the highest cumulative net profit during the same period, showing a certain scarcity in profitability. In addition to the superior profitability, Lyun Software also has a strong product ecosystem stickiness. The "Lyun CloudChain" system, which is centered around PMS, seamlessly connects various modules through APIs, covering the entire chain of hotel operations. Once a hotel adopts it, the cost of replacement is extremely high, creating a deep moat for the business. Therefore, the customer retention rate of over 96% for the first nine months of 2023 to 2025. From the above, it can be seen that Lyun Software, as an industry leader, has a certain "fundamental strength" in the highly certain digitalization market of the accommodation industry. Growth Pressure: Hidden Risks of "Bottleneck" + Competition from Giants Indeed, the development prospects of Lyun Software are promising, but the company still faces inevitable growth pressures. According to public information, the domestic digitalization market for the accommodation industry is currently mainly led by Lyun, Beijing Shiji Information Technology, and Mengguang Information, and these three are the core solution providers in the industry. Lyun Software, with a market share of 16.8%, is leading the way, but has not opened up an absolute gap. Specifically, each of these three has its own advantages. Lyun Software emphasizes the full digitalization of the entire booking to check-out chain and has accumulated deep experience in self-service, ranking first in the number of high-end hotels signed. Beijing Shiji Information Technology's XMS is known for its depth of functions and stability, with a strong foundation in the mid-range hotel market, and has successfully signed numerous international hotel groups, taking the lead in internationalization. Mengguang Information, relying on Huazhu's chain operation experience, focuses on modular products that are "ready-to-use," with short implementation cycles, and is highly competitive in the economy and mid-range chain hotel sectors that pursue high efficiency replication. Based on the competitive landscape above, Lyun Software also notes in its prospectus the risks of competition from competitors with diversified capabilities, some of which may have longer operating histories, larger business scales, and stronger resources than the company. In addition to the competitive pressure from giants, it is worth noting that Lyun Software also faces the core hidden risk of a "bottleneck." According to the prospectus, the company is heavily dependent on a foreign software company codenamed "Supplier A," with procurement accounting for over 65% annually, and the top five suppliers together accounting for over 80%. This means that although Lyun has achieved a leading position in the application layer, its underlying core technology is still controlled by others. This dependency not only brings potential risks of supply chain interruption but also could erode already tight profits due to increased compliance costs and weakened bargaining power. In summary, in the race for digitalization in the domestic accommodation industry, Lyun Software is a leader with favorable terrain but carries the "hard wounds" on its shoulders. Its competitive pressure, superficially about competing for customers, is deep down a battle against time to solve the bottleneck of core technology. In the short term, these risks may suppress valuation; in the long term, it depends on whether the company can use its funds after listing to break through the bottleneck and prove its growth story.