Introduction to this report:
The slight year-on-year increase in the company's net profit in the first three quarters of 2023 was mainly due to a decrease in company costs, a marked decline in sales expenses and contingent liability provisions. The company continued to promote refined operations and was optimistic about future performance.
Summary:
Maintain the company's “increase in holdings” rating and maintain the target price of HK$115.43, corresponding to 7.5 xP/E in 2023.
The company's revenue for the first three quarters of 2023 was RMB 11.794 billion (same unit below), -6.74% year-on-year, and adjusted net profit of RMB 3.304 billion, or 0.54% year-on-year. The performance was in line with expectations. The 2023-2025 revenue forecast was maintained at 156.59/185.10/209.69 billion yuan, -5.4%/18.2%/13.3% year-on-year, and adjusted net profit of 44.42/52.39/6150 billion yuan, 5.6%/17.9%/17.4% year-on-year. Maintain the company's “increase in holdings” rating, and maintain the target price at HK$115.43, corresponding to 7.5 xP/E in 2023.
Better cost control is the main reason for the slight year-on-year increase in profit. The company's net profit increased slightly by 0.54% in the first three quarters of 2023. From the analysis of profit drivers, revenue and costs contributed -4772%/5047% respectively. Better cost control was the main cause of the slight increase in profit. Among them, sales expenses fell 22.52% year on year, reflecting the cost side optimization brought about by the company's continued refined operation; contingent liability provisions fell 31% year on year, compared to 2022Q3 (current 90+ overdue rate of 2.3%), the company's asset quality improved (2023Q3's 90+ overdue rate 1.8%), the company's early provisions were relatively conservative, and the current asset quality was good As expected, the company's contingent liability provisions declined accordingly. In addition, the company's financing costs have also continued to decline. According to the company's disclosure, the issuance of new ABS has pushed the company's financing costs to a new low in the third quarter of 2023.
Credit investment remains steady, refined operations are beginning to bear fruit, and we are optimistic about the company's future performance growth.
The company's credit investment in the third quarter of 2023 was 123.1 billion yuan, +11.3% year-on-year and -0.9% month-on-month. Of these, about 56% of loans were provided through a capital-light model, and overall credit investment remained steady. The company stated, “Due to the slowdown in macroeconomic recovery and the weakening consumer demand for credit, we adjusted our strategic approach in a timely manner, focused on refined operations, and sought breakthroughs in terms of both increased profitability and qualitative growth.” From the decline in sales expenses, it can be seen that the company's refined operations have begun to bear fruit. In the future, the company will continue to optimize business initiatives and promote business model and technological innovation. Refined operations are expected to help continue to grow in performance.
Catalyst: In anticipation of economic recovery, asset quality has improved and loan disbursements have increased.
Risk warning: The economic recovery fell short of expectations; the product defect rate increased dramatically.