A few days ago, Nomura Securities covered the fintech industry for the first time and strongly recommended the purchase of Qifu Technology. As an industry leader, Genius Technology has become a target that has attracted the attention of investors with its long-term stable asset performance, high proportion of capital-light business and AI-led technological innovation. Nomura expects a price target of $22.72 with a potential upside of 54.5%.
The analysis points out that due to the impact of macro factors, the valuation of the credit technology industry is at a historical low. This undervaluation provides investors with a rare entry opportunity. Especially after the normalization of regulation, investors will pay more attention to the profitability of various platforms.
From the perspective of industry growth, Nomura is optimistic about the future growth of Internet consumer loans and inclusive small and micro loans. It is estimated that by 2025, the market size of these two fields will reach 8 billion yuan and 41 billion yuan respectively, which means that the compound annual growth rate from 2022 to 2025 will be 8.2% and 14.6% respectively, showing a steady and long-term growth trend.
Chart: China's consumer finance market has seen steady growth in its lending balance
Nomura believes that internet consumer finance plays a vital role in stimulating consumption and promoting economic recovery, and the relaxed regulatory environment also contributes to the development of the industry.
Chart: Consumption plays a key role in stimulating economic recovery
With regulatory overhaul officially completed last year, most credit tech companies in the industry have adjusted their business focus towards a more capital-light model. According to Nomura, the key success factors in the credit tech space in the current situation include unique scenarios and customer acquisition, risk management technology, and operational efficiency.
Nomura pointed out that Qifu Technology is a leader in the fintech industry and a leader in capital-light transformation. With excellent risk control technology, the asset quality has been stable for a long time, the financing cost has gradually decreased among diversified funding sources, and the efficiency of business operations has been continuously improved with the help of advanced technology.
Chart: The performance of the risk indicators of Qifu Technology is stable
Figure: The cost of capital of Qifu Technology is better than that of its peers
Chart: Proportion of capital light business of Qifu Technology
In addition, the company has also done a good job of giving back to shareholders, announcing a 20-30% dividend payout ratio and a share buyback plan of $70 million remaining, which is quite a compelling move given the current level of stock valuation.
Nomura believes that in the face of a weak macro environment, the company will leverage its excellent risk management capabilities to achieve solid earnings growth that outperforms its peers.
Source: Qifu Technology
Disclaimer: This article is a reprint and does not represent the position of this journal and does not constitute investment advice.