Introduction to this report:
The company's revenue declined and profit increased, mainly due to a decrease in costs due to a decrease in sales expenses, capital costs, etc. In the future, the company will pay more attention to refined operations, tighten risk control strategies, and achieve qualitative growth.
Summary:
Maintain the company's “gain” rating and maintain the target price of HK$115.43, corresponding to 6.8xp/E in 2024.
The company's 2023 revenue was RMB 16.290 billion (same unit), -1.59% YoY, and adjusted net profit of RMB4.454 billion, or 5.92% YoY. The performance was in line with expectations. Revenue for 2024-2026 is expected to be $165.91/177.27/18.967 billion yuan (pre-adjusted 2024/2025 revenue of $18.5.10/20.969 billion yuan), 1.8%/6.8%/7.0% YoY, and adjusted net profit of $47.38/50.22/5.738 billion (pre-adjusted 2024/2025 net profit of $52.39/6.150 billion yuan), 6.4%/6.0%/14.3% YoY.
Maintain the company's “gain” rating and maintain a target price of HK$115.43, corresponding to 6.8xp/E in 2024.
Better cost-side control is the main reason for profit growth. The company's net profit increased by 5.92% in 2023. From the analysis of profit drivers, revenue and costs contributed -106%/261% respectively. Better cost control was the main reason for profit growth. Among them, sales expenses fell 12% year on year, reflecting the cost side optimization brought about by the company's continued refined operation; contingent liability provisions fell 30% year over year, mainly due to the decline in the size of the company's heavy capital loans. In addition, the company's financing costs also continued to decline. The company issued ABS in 2023 totaling 12.5 billion yuan, an increase of 56% over the previous year, while the financing cost of ABS was lower, and the issuance of new ABS drove the company's financing costs to continue to decline in 2023.
Refined operation will be the core of the company's steady development in the future, and continued vigorous repurchases demonstrate the company's confidence. The company's 2023Q4 credit investment scale was 1119 billion yuan, +13.8% year-on-year and -3.3% month-on-month. Of these, about 57% of loans were provided through a capital-light model, and credit investment was tightened month-on-month. The company stated, “We will continue to carefully plan our business, continue to tighten risk control strategies, optimize our business portfolio, and focus on improving profitability and operational efficiency to achieve qualitative growth.”
It is expected that in the future, the company will pay more attention to optimizing operational efficiency, which in turn will lead to profit growth. Furthermore, the company announced a new round of $350 million repurchase plans. Continued share buybacks demonstrate the company's confidence.
Catalysts: Improved asset quality and increased loan issuance.
Risk warning: The economy falls short of expectations; the non-performing rate has increased dramatically.