Company profile

Established in 2014, Yixin Group is the largest online auto finance trading platform in China. The company's revenue mainly comes from service fees for loans facilitated on auto trading platforms, as well as self-financing operations. Shareholders include strategic investors such as Tencent and JD. The company uses credit reporting data and system support from Tencent and JD to obtain consumer information and enhance credit analysis capabilities. As of the first half of 2024, the company's cumulative financing transaction volume was nearly 350 billion yuan (RMB, same below), and the cumulative automobile transaction volume exceeded 4 million vehicles. The company operates in more than 340 cities, connecting more than 0.036 million partners such as automakers and car dealers, as well as more than 100 financial institutions. In recent years, the company has also been actively developing the fintech sector and used car business, expanding the scale of automobile transactions in addition to expanding the second growth curve.

The volume and scale of financing increased sharply in the third quarter, and the used car business grew steadily. According to the company's announcement, the company contributed to a total financing transaction scale of 18.5 billion yuan in the third quarter of 2024, an increase of 4.5% over the previous year. The total number of auto financing transactions during the period increased to 0.192 million, an increase of 5.2% over the previous year. Among them, the number of new and used cars was 0.099 million and 93,000, respectively, and the volume of used car transactions increased sharply by 27.4% year-on-year, to 48% (40% in the same period in 2023). In the context of the introduction of the used car circulation support policy in 2022, I believe there is still room for improvement in the development of the used car market in China. Therefore, the company has also been actively developing used car financing business in recent years, reflecting its competitive advantage with mainstream financial institutions. In addition, due to the continued increase in NEV penetration in China, the company's total NEV financing transactions increased 26.8% year-on-year to 0.053 million in the third quarter.

The fintech business performed well

The amount of financing facilitated by the fintech model in the third quarter was about 5.6 billion yuan, an increase of 87.2% over the previous year, of which new energy vehicles accounted for about 60.6%. The company continues to reach strategic cooperation agreements with financial institutions, automakers and third-party technology companies to enable the entire automobile financing process. In the third quarter of this year, the company established a cooperative relationship with the Qinong Bank and the Bank of Beijing to expand its business scope.

The company is expected to seize the strong demand of financial institutions in the automotive fintech sector and drive improved performance.

valuations

Benefiting from the rapid growth of China's NEV market and the growing maturity of the used car market, the company's profits are expected to gradually be optimized. Adjusted net profit for 2023 was 0.91 billion, up 32.2% year over year. Adjusted net profit for the first half of 2024 was 0.51 billion, up 22.9% year over year. The company's adjusted net profit for the full year 2024 increased by 10%-15% year on year. Currently, the corresponding valuation is about 5-6 times the price-earnings ratio.

Investment risk 1. Financing business policy and regulatory risk; 2. The expansion of the new and used car business fell short of expectations; 3. Overdue rates are rising.