The business model of Internet financing enterprises is undergoing a transformation from interest income to service income. Internet enterprises transform from balance sheet logic to income statement logic, rely on their own data, flow and risk control, and charge service fees based on financing scale, which will help the valuation break through the undervalued constraints of traditional financing business. Not only that, the ecology of scenarios, customers and data brings "traffic quality", and financial business valuation can be put on the wings of technology.

Internet financing industry: the transformation and development is in progress.

The business nature of financing is intertemporal exchange of values. This report focuses on the analysis of the Internet financing industry, that is, institutions that conduct business based on online models. At present, it mainly includes: 1) direct licensees: companies with financing business as the main business, including Internet banks, consumer finance companies and Internet small loan companies; 2) indirect licensees: Internet companies, not only hold the above licenses, but also have scenarios and data ecology, such as Tencent Department, JD.com Department and so on. There are usually two types of business models, including the interest income model for operating balance sheets and the service income model for operating income statements; these two types of institutions may involve one or both models at the same time.

Interest income model: emphasis on the balance sheet.

The core of this model is table expansion, capital is the key, bear interest income and risk costs, the main representative is consumer financial companies. Business logic: "profit = financing scale × spread-risk". From the perspective of profit-driven factors:

1) scale, most of the head consumer finance companies are in the scale of 10 billion yuan. The average asset growth rate of Top 10 in 2019 is 24%, which is still in a period of rapid development.

2) pricing, the pricing of asset-end products is mostly in the range of an annualized interest rate of 12%. The financing cost of institutional debt at the liability end is currently reduced to less than 5%, and the spread is expected to be about 10%.

3) risk control, the bad level of the first four consumer financial companies in 2019 is about 2% Ry4%, and has shown a steady downward trend in recent years. The net profit margin of the head organization is mostly in the range of 10% muri 20%, while the ROA level is basically in the range of 1% muri 2% (the data come from the financial reports of each company, the same below).

Service income model: operating income statement.

The core of this model is that it does not occupy the table, does not need funds, does not bear credit risk, and collects service fees. The main representatives are the head financial technology platform and some Internet small loan companies. Business logic: "profit = drainage scale × service rate". From the perspective of profit-driven factors:

1) scale stratification, the financial technology platform promotes the loan balance to be more than 100 billion (some institutions reach the order of trillion), and the head Internet small loan is in the order of 10 billion.

2) the rate is relatively high, and the share of platform fee (or transaction promotion fee) in the interest income of financial institutions is about 30%. Taking 360 Finance as an example, it is estimated that the absolute rate level in 2019 is 4.43%.

3) the profit index is optimistic, and the light capital model continues to advance. Most of the large financial technology platforms account for more than 95% of the light capital business, and some Internet small loans light capital mode accounts for more than 50% of the income. At present, the ROA of listed companies dominated by Internet small loans is basically more than 10%.

Valuation methods of Internet financing institutions: drainage capacity (financing scale) and liquidity (profitability).

Focus on the analysis of listed Internet small loan companies:

1) financing scale:It can be valued by "market value / loan size" or "market value / loan balance". Among the five Internet small loan institutions listed on US stocks (partly transformed from the online lending platform), the current "market capitalization / loan size" is distributed in the 0.03X-0.08X range, and the "market capitalization / loan balance" is basically distributed in the 0.1X-0.2X range.

2) profit scale:The valuation can be made by Pax E or Pamp S. Of the five institutions mentioned above, the current Pmax E valuation 1XMZ 15X Magi PPPPPPG S valuation 0.3X-1.5X range. Companies with sustainable growth in scale, stable rate pricing and less credit risk-taking have more stable profit growth and more significant valuation premium.

"flow quality" plays a profit role, and "platform value" determines the valuation logic.

As the sample platform of Internet small loans may still bear credit risk, the valuation results can not fully reflect the valuation level of the financing service model. We believe that the Internet giant is a platform-based financial technology enterprise, based on its "ecological platform", it will break the upper limit of the existing financing business valuation, because the ecological platform brings "traffic quality" to the company: 1) massive scenarios and customers, bring the potential of continuous financing scale; 2) massive data and technology, bring risk identification and pricing power. In short, the ecology of scenarios, customers and data can help financial logic enjoy the valuation of science and technology.