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 2024Q1 revenue was RMB 4.153 billion (same unit), +15.39%/-7.61% YoY, and adjusted net profit of RMB 1,2005 billion, +23.40%/+4.70% YoY. The results were in line with expectations. The estimated 2024-2026 revenue is 165.91/177.27/18.967 billion yuan, 1.8%/6.8%/7.0% YoY, and adjusted net profit of 47.38/50.22/5.738 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.
The increase in financing revenue due to the expansion of loan size in the table was the main reason for the increase in profits. The company's net profit increased by 23.40% in 2024Q1. From the analysis of profit drivers, revenue and costs contributed 242%/-86% respectively. The revenue growth was mainly due to the increase in financing revenue, which reached 1,535 billion yuan, 44% over the same period. The increase in financing revenue stemmed from an increase in the loan balance in the company's statement. We determine that the company's issuance of more ABS was the main reason for the increase in balance in the statement. The company's issuance of more ABS is also conducive to reducing financing costs. The company's current financing costs have been reduced to the lowest in history.
The reduction in financing costs led to an expansion in the take-rate, and the 2024Q1 net take-rate (non-GAAP net profit/average balance on loan balance) expanded to 3.5% (2.9% for 2023Q1 and 3.2% for 2023Q4).
Qualitative growth will be the core of the company's future development, and continued vigorous repurchases demonstrate the company's confidence. The company's 2024Q1 credit investment scale was 99.2 billion yuan, -9.3% year-on-year. Of this, about 61% of loans were provided through a capital-light model. The company's credit investment continued to be tightened against the backdrop of uncertainty in the macro environment. The company's 90+ overdue rate has climbed to 3.35%, mainly due to rising overdue dates compounded by falling loan balances. The leading indicator D1 default rate of 4.9% has improved, and the 90+ overdue rate is expected to gradually improve. It is expected that the company will pay more attention to optimizing operational efficiency in the future, which in turn will lead to profit growth. Furthermore, the company continues to advance its $350 million repurchase plan. The current repurchase schedule is faster than the schedule. Continued share repurchases 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.