Sales Partners Continue To See Greater Financial Stability.  Results for the fourth quarter were mixed, as Trust origination was up over 13%, but well below the third quarter and our estimate.  Interest Fees from the Trust model, which totaled RMB 405.2 million, were down slightly from the year ago period due to the declining blended interest rate charged to borrowers.  Commercial origination tumbled due to the higher rates being charged by its banking partners for this product.  Additionally, Net Revenue from this model dropped significantly in the quarter, to RMB 10.3 million, due to an adjustment of the estimated loan duration.  We expect this line item to be relatively stable going forward after the change.  Interest Expense continued to fall from the year ago period relative to Trust origination growth as the Company has been successful in lower rates from its Trust partners.  Provision for Credit Losses continues to fall from year-over-year comparables due to the installment loans that are helping keep the sales partners current on their equity position.  In the fourth quarter, this also impacted Other Gains, which declined to a RMB 11.1 million loss, due to previously forfeited credit positions being reacquired by sales partners.  Operating expenses were held relatively flat, however CNF did take a RMB 7.5 million non-cash expense for a stock option extension, some of which will carry into 2024.  Net Income for the quarter was RMB 18.5 million, or 0.01 per share, missing our estimate due primarily to the Commercial duration adjustment and reacquired credit positions, both as discussed above.

Share Repurchase/Stock Price Update.  The Company repurchased roughly $1,500,000 of stock during the fourth quarter, leaving a couple million left on the original $20 million repurchase plan.  The plan expired in March, however the Company noted on the conference call that it intended to seek Board approval to continue buying shares.  We again note that the repurchased shares are being kept as Treasury Stock and not retired.

Model Update.  We made a handful of changes to our estimates, including making a reduction in our origination estimates for 2024,  from RMB 20.8 billion to RMB 18.4 billion.  This reduction is tied to what has been a weaker start to the year and uncertainty over the property market.  However, we note there have been positive developments, like the reduction in LPR and ongoing reductions in down payments, and thus have left our second half origination numbers mostly unchanged in anticipation of a stronger market.  Other key changes include reducing Commercial Bank Net Revenue due to the duration change, reducing the Provision for Credit Losses, and reducing Other Gains.  The change to the bottom line is a reduction in EPS from 0.20 to 0.18 per share.

Maintaining Rating & Reducing Target. The Company had a mixed fourth quarter and should start seeing results improve due to government support to the property market and more liquid sales partners. Due to the changes in our estimates, we are reducing our target price on CNFinance from $5.50 to $5.00 per share, but maintaining our Buy rating as we continue to believe the Company is well positioned to capture a great deal of market share once the economy and property market firmly turn upwards. Our target price is based on a Price-to-Earnings multiple of 10 times our 2024 currency-adjusted Diluted EPS estimate of RMB 0.18 per ordinary share, converted to ADS.