Main points of investment
Over the past decade, ants have taken advantage of the rapid expansion of the mobile Internet and strategically transformed into a technology financial platform. Ant Financial Services Group began to expand its business segment strategically in 2010. after its establishment in 2014, Alipay accelerated to obtain license qualification; riding the tide of mobile Internet such as O2O, sharing economy and offline payment, it achieved the ecological flow of Alipay by virtue of its payment business. and take technology, credit information, risk control and operation system as the enabling means to consolidate the industry advantages in micro-lending, financial management and insurance sectors. 2020H1, Ant Group's operating income reached 72.5 billion yuan (+ 38%), net profit 21.2 billion yuan (+ 1460%), digital payment, digital financial technology and innovation business accounted for 36%, 63% and 1% respectively.
Traffic entrance Alipay actively extends the life service scene, precipitating a large number of user data. In 2020, Q1 Alipay accounted for 55% of the transaction value of domestic third-party mobile payments (about 29.4 trillion). The number of monthly active users of Alipay has exceeded 700 million. Superimposing the overseas payment and wallet layout, the global monthly active users of the pan-ant system has reached 1.3 billion. Under the Hengqiang pattern of the strong, the bargaining power of the head platform is enhanced, the subsidies for users and merchants are gradually reduced, and the comprehensive rate of ant's payment business is expected to increase steadily from the current 0.4%.
The micro-loan business has changed from a self-run consumer loan to a platform model, opening up the market space. Ant began to rein in the scale of proprietary consumer loans in 2018 to meet the regulatory requirements of capital leverage ratio, and the focus of its business shifted to platform businesses such as lending aid and joint loans. With the ant flow and credit information system, combined with the platform business model, the overall credit business has developed rapidly. At the end of June 2020, the loan balance reached 2.15 trillion, of which the self-operated loan balance accounted for only 1.68%; revenue accounted for 39.4%, comparable to the payment business.
The trend of financial management and insurance online is clear, and the growth rate has remained high in recent years. As an one-stop financial platform, ants empower asset management and insurance companies in products, customers, investment, and risk control. As of June 2020, Ant has cooperated with 170 asset management companies to achieve an AUM of 4.1 trillion yuan (+ 35.9%). We judge that financial management and online insurance is a long-term trend. At the same time, Alibaba Health Information Technology will also provide cooperation space for insurance business, and the related income is expected to maintain 40% and 60% of CAGR in the next three years.
Profit Forecast and valuation suggestion: our revenue forecast for 2020-22 is 171.1 billion / 228.7 billion / 297.7 billion and profit forecast is 40.1 billion / 48.6 billion / 61.2 billion. At the same time, we evaluate the SOTP segment according to the business attribute and growth rate, including PayPal Holdings Inc, Lending Club, 360 Finance, Charles Schwab Corp and Oriental Fortune. The total business valuation is RMB 1.7723 trillion, corresponding to our profit forecast for 2021, which is about 36 times PE.
Risk tips: tighter regulatory policies; less-than-expected overseas expansion; increased competition in the third-party payment industry