Leading market position. 51 Credit Card is the largest online credit card management platform, the largest P2P lending platform for credit card users and the largest independent online credit card application platform in China. In May 2012, 51 Credit Card launched 51 Credit Card Butler, a tool that meets the needs of users to manage their debts. By the end of 2018, the number of registered users of 51 credit card butler application reached 75.9 million, the cumulative number of credit cards managed reached 123 million, the market share reached 18%, and credit card bills and other debt repayment transactions reached 187.2 billion yuan for the whole year. The company has accumulated a lot of data by providing credit card management services. On this basis, the company provides a number of services to users, including credit card technology services and online credit matchmaking and investment services. Judging from the income structure in 2018, credit matchmaking and service fees, credit card technology service fees, Xiaobai Maimai Inc introduction service fees accounted for 73%, 9% and 7% respectively.

The space is vast and the integration is accelerated. With the growth of residents' wealth income and the improvement of consumer demand, the consumption pattern continues to upgrade, the habit of credit consumption is gradually formed, the consumer credit market arises at the historic moment, and the prospect is broad. According to our estimates, assuming that the growth rate of consumer expenditure in the next five years remains at 10% compared with the same period last year, and the proportion of consumer credit to consumer expenditure increases to 30% year by year, the scale of domestic non-residential consumer credit will exceed 16.8 trillion yuan by 2025, with a compound annual growth rate of 14%. Based on the broad development prospects of this market, more and more participants have entered the market, including banks, e-commerce and Internet lending platforms. Compared with banks, although the cost of capital of the Internet lending platform is relatively higher, the requirements for asset quality are relatively low, and it can cover the potentially effective credit demand that banks cannot cover. It has the advantages of flexibility and convenience, as well as a faster and smoother trading experience. Compared with e-commerce, although e-commerce has a unique consumption scene and traffic entrance, but the customer group is scattered, and the Internet lending platform, as a platform for vertical people, attracts customers with certain commonalities and is easier to realize. The earliest Internet lending platform in China is Yixin, which was established in 2006 and entered a period of rapid development in 2011. With a series of regulatory policies introduced at the end of 2017, the industry entered a period of contraction and consolidation, with the number of online lending platforms falling from 3579 in 2015 to 1021 in March 2019. Looking to the future, we believe that two types of market participants will stand out: one is companies that dig deep into vertical scenes and segments of people, and can achieve differentiated competition different from banks and e-commerce. The other is companies that can maintain stable asset quality with the help of technical means such as big data and risk control.

The core advantages are highlighted. 51 credit card, as one of the leading Internet lending platforms, on the one hand, with the absolute leading position of credit card management as a vertical industry, has its own traffic, so as to retain users and gradually realize their needs. Build a financial ecosystem based on credit card management On the other hand, with legal compliance business and prudent risk management, it is expected to maintain sound business development and stable asset quality through compliance filing, and continue to benefit from the acceleration of industry consolidation. (1) legal business compliance: the company always strictly complies with the requirements of national supervision and insists on the credit intermediary position of matchmaking loans, which helps to reduce operational and regulatory risks. 51 Personality platform has taken the lead in completing the data docking and submission of the P2P network loan risk special data reporting system in September 2018, and has successfully completed the self-examination in accordance with the regulatory requirements. (2) ecosystem based on credit card management: most fintech companies that cut into credit demand adopt a P2P approach, which requires continuous buying of borrowers on the one hand and investors on the other, and then match and match. Apart from the Internet giants, the company is one of the few Internet lending platforms that have their own traffic, can retain users and gradually realize their needs. The company has become the absolute head of the vertical industry of credit card management, attracting customers with certain commonalities, and this user group has a stronger cash potential. The company excavates users' income, consumption, repayment and credit records. Through the provision of credit card applications and loans and investment and other services for cash, and reasonable risk control. (3) prudent risk management: the value of the company's user base is high, these users are strictly screened by traditional financial institutions, and systematically record and manage their credit card use and repayment information. Based on the low-cost and high-value user base, relying on a large number of credit data accumulated by credit card management services, including transaction records of different bank cards, consumption records of different consumption occasions and repayment records in the user's life cycle, the company can evaluate users' repayment ability in an all-round way and form a more reliable borrower credit evaluation system. Thus help the company to effectively control the risk under the strict supervision environment.

For the first time, coverage gives an increase in holdings. We predict that the non-international financial reporting standards (EPS) of 2019-2021E will reach 0.70 yuan (5.67% year-on-year growth), 1.12 yuan (59.60% year-on-year growth) and 1.35 yuan (20.49% year-on-year growth). At present, the company's share price corresponds to 5.38 times 2019E, which is the same as the industry average. Based on the broad market space of China's consumer credit and the company's leading market position, we think that the risk-return ratio of the company is attractive. Based on the discounted cash flow model and the relative valuation model, we arrive at a target price of HK $4.95, corresponding to a price-to-earnings ratio of 6.2 times 19e and an upside space of 15%, giving an overweight rating for the first time.