Bank of America reiterates Lu Jin's LU Buy Rating: In addition to the solid results in the third quarter, there are additional surprises

Disclosure of dividend policy, full-year dividend income is expected to be about 5%

On November 10, Bank of America Securities released a research report reaffirming its "Buy" rating on Lu jin holdings (NYSE: LU) with a target price of $15.0/ADS.

According to the latest quarterly report of Lujin Holdings, its net profit in the first nine months of 2021 increased by 28.4% year-on-year to RMB13.8 billion, and the return on net assets and net profit margin remained at a high level of 21.4% and 30.2% respectively in the first nine months. Bank of America believes that Lujin Holdings has demonstrated a sound operating and financial position, and a clearer regulatory policy may play a positive catalytic role in the future performance of the stock. At the same time, for the dividend policy disclosed in the quarterly report, the Bank of America said it was a "positive surprise" for investors.

Quarterly loans have doubled with the ring, and the cost reduction has solved the problem of entity financing

According to the quarterly report, the new loans of the retail credit business controlled by Lujin in the third quarter achieved year-on-year and quarter-on-quarter increases of 16.2% and 12.4%, respectively, in line with bank of America's expectations. At the same time, the comprehensive borrowing cost of loans managed by Lujin Holdings has steadily declined, reaching 23.1% in the third quarter of 2021 and 26.6% in the same period last year. The report cites management guidance that the company will further reduce costs to less than 20% to better serve the real economy.

Up to 40% of the net profit is used for dividends, sending a positive signal to investors

Bank of America gave a positive assessment of the dividend policy released in the quarterly report of Lu Jin Holdings. Its board of directors approved a dividend policy and plans to distribute recurring cash dividends to shareholders in the proportion of 20 to 40% of the net profit of the previous fiscal year from 2022, the quarterly report said.

If the payout ratio is estimated at a median of 30%, the dividend yield is approximately 5% based on the current trading price of Lu Jin Holdings. Bank of America said the dividend policy of Lujin's holdings and the two rounds of $1 billion share repurchase programs announced earlier this year reflect the company's management's positive consideration of investors.

Disclaimer: This article is for informational purposes only and does not constitute investment advice.

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