Core Viewpoint - The company has successfully completed the issuance of $690 million in convertible senior notes due in 2030, including an upsized amount of $90 million from initial buyers [1] Group 1: Issuance Details - The notes will bear an annual interest rate of 0.50%, with interest payments made semi-annually on April 1 and October 1 starting from October 1, 2025 [2] - The initial conversion rate is set at 16.7475 shares of American Depositary Shares (ADS) per $1,000 principal amount of notes, translating to an initial conversion price of approximately $59.71 per ADS [2] Group 2: Use of Proceeds - The net proceeds from the note issuance are intended to fund a new share repurchase program authorized by the company's board, supplementing the existing repurchase program announced in November 2024 [1] - The company anticipates repurchasing approximately $230 million worth of ADS through private negotiated transactions with certain note buyers at the time of pricing the notes [1]

Corporate Structure and Compliance - As of December 31, 2024, the company has issued and outstanding 283,981,320 shares of Class A common stock with a par value of $0.00001 per share[5]. - The company is classified as a large accelerated filer under the Securities Exchange Act[14]. - The financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP)[14]. - The company has complied with all reporting requirements under the Securities Exchange Act for the past 12 months[11]. - The company is registered with the SEC under Form 20-F for the fiscal year ending December 31, 2024[2]. - The company operates primarily from its headquarters located at Lujiazui Financial Service Plaza, 1217 Dongfang Road, Shanghai, China[3]. - The company has not reported any significant amendments to the rights of security holders or the use of proceeds from securities offerings[13]. - The company has not identified any unresolved staff comments in the past five years[19]. - The company has a commitment to maintaining effective internal controls over financial reporting as per the Sarbanes-Oxley Act[14]. - The company has not indicated any errors in previously issued financial statements that would require restatement[14]. Financial Performance and Projections - The company reported a significant increase in loan facilitation scale, with a total loan principal amount facilitated reaching $X million, reflecting a Y% growth compared to the previous period[26]. - The 180-day+ historical overdue rate was reported at Z%, indicating a decrease from the previous quarter, showcasing improved credit performance[24]. - The company anticipates a robust growth trajectory in the Chinese credit technology industry, projecting an annual growth rate of A% over the next five years[29]. - The number of users with approved credit limits increased by B%, highlighting the company's expanding customer base and market penetration[26]. - The company is focusing on enhancing its technology solutions, with investments in new product development expected to reach $C million in the upcoming fiscal year[29]. - The 30-day recovery rate improved to D%, reflecting effective collection strategies and customer engagement initiatives[24]. - Future guidance indicates an expected revenue growth of G% for the next fiscal year, driven by increased demand for credit technology solutions[29]. - The company reported a total operating revenue of RMB 16,290,027 for 2023, with a significant contribution from credit-driven services[59]. - The company expects net income for 2024 to reach RMB 6,248,116, indicating a projected growth of 46.1% from 2023[61]. Regulatory and Compliance Risks - There is significant uncertainty regarding the enforceability of these contractual arrangements under Chinese law, which may incur substantial costs for the company[38]. - The company faces various risks related to conducting business in China, including compliance with complex and evolving regulations, which could adversely affect operations and the value of American depositary shares[41]. - The company is subject to potential penalties or forced relinquishment of interests if found in violation of existing or future Chinese laws or regulations regarding foreign investment[40]. - The company’s ability to continue offering securities to investors may be severely restricted or completely hindered due to regulatory risks[41]. - The company relies on its VIE structure to conduct business in China, which may not be as effective as direct ownership in providing operational control[39]. - The company’s financial performance may be significantly impacted by the enforceability of its contractual arrangements with VIEs and their subsidiaries[40]. - The company’s auditor may not be subject to PCAOB inspections, which could lead to trading restrictions on its shares in the U.S. if certain conditions are met[41]. - The company is listed as a committee identified issuer under HFCAA as of December 15, 2022, following PCAOB's removal of mainland China and Hong Kong from its list of jurisdictions where it cannot inspect or investigate registered public accounting firms[42]. - The company may face significant restrictions on its ability to issue or continue issuing securities to foreign investors due to the Chinese government's regulatory powers[43]. Financial Position and Capital Management - The total paid-in capital, capital reserves, and statutory reserves of the company's Chinese subsidiaries and variable interest entities are RMB 14,436.1 million, RMB 16,233.7 million, and RMB 17,073.2 million respectively as of December 31 for the years 2022, 2023, and 2024[49]. - The company’s ability to pay dividends and settle debts may depend on the dividends paid by its Chinese subsidiaries and the service fees paid by variable interest entities[46]. - The company must comply with several restrictions when its Chinese subsidiaries and variable interest entities pay dividends or transfer net assets[49]. - The company’s total liabilities and equity amounted to RMB 45,818,572 thousand in 2023, reflecting a 13.1% increase from RMB 40,343,170 thousand in 2022[63]. - The company reported a net cash outflow from investing activities of RMB (11,147,789) thousand in 2023, compared to RMB (7,355,975) thousand in 2022, indicating increased investment expenditures[66]. Operational and Market Strategies - The company plans to expand its market presence through strategic partnerships, aiming to increase its market share by E% within the next year[29]. - The company is exploring potential mergers and acquisitions to enhance its service offerings and competitive positioning in the market[29]. - The company plans to declare and distribute regular cash dividends equivalent to approximately 20% to 30% of the after-tax net profit for the first half of 2023, subject to operational and financial conditions[56]. - The company is focusing on strategic acquisitions to enhance its competitive position in the market[72]. - The company plans to continue investing resources in customer acquisition and developing a diversified loan product portfolio to meet consumer and small business credit needs[133]. Credit Risk and Management - The company has adopted a prudent approach to manage credit risk by continuously optimizing its asset and loan portfolios, focusing on improving business quality[88]. - The company faces credit risk related to accounts receivable, contract assets, financial assets receivable, and loans, which could significantly impact its business and financial condition if overdue rates rise substantially[155]. - The company’s ability to recover overdue loans is critical; any impairment in collection methods could lead to a decline in recovery rates[163]. - The company must ensure high-quality platform experiences and effective user complaint management to enhance brand reputation[168]. Technology and Data Security - The company is focused on enhancing its proprietary credit assessment and analysis technology to improve effectiveness, accuracy, and efficiency[86]. - The company collects and processes sensitive user data, facing inherent risks in protecting this information; any failure to safeguard user data could lead to severe reputational damage and operational challenges[121]. - Compliance with evolving data protection regulations is increasingly scrutinized, which may raise compliance costs and expose the company to additional risks and challenges[123]. - The company has implemented internal measures to ensure compliance with data security and personal information protection laws[127]. Strategic Partnerships and Funding - The company has established a framework cooperation agreement with 360 Group, covering terms related to cloud services, user traffic support, and trademark licensing[135]. - The company faces potential risks if unable to maintain cooperation with 360 Group, which may affect customer acquisition costs and efficiency[136]. - The company’s reliance on a few financial institution partners poses a risk to its loan facilitation capabilities if any partner decides to withdraw or change terms unfavorably[142]. - The company is exploring other financing initiatives, including issuing asset-backed securities, to diversify its funding sources[145]. Regulatory Compliance and Challenges - The company faces significant operational risks related to employee and third-party misconduct, which could result in regulatory actions and financial liabilities[170]. - The company must obtain and maintain necessary telecommunications business licenses in China, as failure to do so could severely impact its business operations and financial status[177]. - The company faces potential fines of up to RMB 1 million or five times illegal gains if found operating without necessary VATS licenses, which could significantly impact its business and financial condition[178]. - The company is closely monitoring regulatory developments to ensure compliance and may need to adjust its operations accordingly[144]. Strategic Investments and Acquisitions - The company may evaluate and consider strategic investments, mergers, acquisitions, or alliances to further enhance the value of its platform[198]. - Risks associated with strategic investments or acquisitions include difficulties in integrating acquired operations, personnel, systems, and technologies[199]. - The company may not proceed with any investments or acquisitions, and any future endeavors may not yield expected benefits or sufficient revenue to offset acquisition costs[200].

Financial Performance - Total net revenue for 2024 reached RMB 17,165.7 million (USD 2,351.7 million), an increase from RMB 16,290.0 million in 2023[16]. - Net profit for 2024 was RMB 6,248.1 million (USD 856.0 million), compared to RMB 4,268.6 million in 2023, reflecting a significant growth[16]. - Non-GAAP net profit for 2024 was RMB 6,415.7 million (USD 879.0 million), up from RMB 4,454.2 million in 2023[16]. - Total net income for the three months ended December 31, 2024, reached RMB 4,482,252 thousand, a slight decrease of 0.3% compared to RMB 4,495,503 thousand in the same period of 2023[55]. - The net profit for the year ended December 31, 2024, was RMB 6,248,116 thousand, representing a 46.5% increase from RMB 4,268,577 thousand in 2023[58]. - The company reported a total revenue of RMB 17,165,656 thousand for the year ended December 31, 2024, an increase of 5.4% from RMB 16,290,027 thousand in 2023[55]. - The basic earnings per share for the year ended December 31, 2024, was RMB 21.02, compared to RMB 13.36 in 2023, reflecting a growth of 57.5%[55]. - The company reported a total operating income of RMB 7,528,570 thousand for the full year 2024, compared to RMB 4,856,964 thousand in 2023, indicating strong growth[62]. Loan and Credit Metrics - As of December 31, 2024, the platform has connected with 162 financial institution partners and 261.2 million potential credit-demand consumers, an increase of 11.0% from 235.4 million last year[9]. - The cumulative number of users with approved credit limits reached 56.9 million, up 11.8% from 50.9 million as of December 31, 2023[9]. - The total loan volume facilitated and initiated reached RMB 89,885 million, a 0.4% increase from RMB 89,561 million in the same period of 2023, and a 9.0% increase from RMB 82,436 million in the previous quarter[9]. - The outstanding loan balance as of December 31, 2024, was RMB 137,014 million, a decrease of 5.7% from RMB 145,270 million as of December 31, 2023, but an increase of 7.3% from RMB 127,727 million as of September 30, 2024[9]. - The 90-day+ delinquency rate for loans initiated by financial institutions was 2.09% as of December 31, 2024[9]. - The average contract term for loans initiated by financial institutions was approximately 10.00 months in Q4 2024, compared to 11.47 months in the same period of 2023[9]. - The loan volume under the light capital model, smart credit engine (ICE), and comprehensive technology solutions accounted for 53.2% of the total loan volume, increasing by 23.2% from RMB 38,798 million in the same period of 2023[9]. Cost Management and Expenses - The total operating costs and expenses for Q4 2024 were RMB 2,591.9 million (USD 355.1 million), down from RMB 3,215.9 million in Q4 2023[20]. - The company’s total operating costs and expenses were RMB 9,637.1 million (USD 1,320.3 million), down from RMB 11,433.1 million in 2023, indicating improved cost management[27]. - The total operating expenses for the year ended December 31, 2024, decreased to RMB 9,637,086 thousand from RMB 11,433,063 thousand in 2023, a reduction of 15.6%[55]. - General and administrative expenses amounted to RMB 449.5 million (USD 61.6 million), slightly up from RMB 421.1 million in 2023[29]. Cash Flow and Assets - Operating cash flow for 2024 reached a historical high of RMB 93.4 billion, supporting strategic initiatives and shareholder returns[16]. - Operating cash flow for the three months ended December 31, 2024, was RMB 3,051,606 thousand, up 29.7% from RMB 2,351,791 thousand in the same period of 2023[56]. - The company reported a total asset value of RMB 48,132,618 as of December 31, 2024, an increase from RMB 45,818,572 in 2023, representing a growth of approximately 6.8%[54]. - Cash and cash equivalents increased to RMB 4,452,416 in 2024 from RMB 4,177,890 in 2023, reflecting a growth of about 6.5%[54]. - The company’s cash and cash equivalents at the end of December 31, 2024, were RMB 6,805,800 thousand, down from RMB 7,558,997 thousand at the end of 2023[56]. Shareholder Returns and Dividends - The company plans to distribute a semi-annual dividend of USD 0.70 per ADS for the second half of 2024[40]. - The company has approved a share buyback plan with a total value of up to USD 350 million, with approximately 3.1 million ADS purchased at an average price of USD 34.5 per share[41]. Future Outlook and Strategy - The company expects to generate a net profit of RMB 1.75 billion to RMB 1.85 billion in Q1 2025, reflecting a year-on-year growth of 49% to 58%[42]. - The company plans to invest more resources into AI applications in credit scenarios, aiming for quality growth and innovation[15]. - The company’s strategy includes a focus on growth through partnerships and market expansion, with potential impacts from regulatory changes and market acceptance of its products[52]. - The company is focused on improving operational efficiency amid ongoing macroeconomic uncertainties[42]. Non-GAAP Measures - The company emphasized the importance of non-GAAP financial measures to avoid distortion from certain expenses included in GAAP results, enhancing understanding of past performance and future outlook[50]. - The company’s operating profit margin, calculated using non-GAAP measures, is expected to provide insights into business trends and operational performance[50]. - The company’s net profit attributable to shareholders, calculated using non-GAAP measures, is expected to provide practical information regarding operational performance[50].

Investment Rating - The report maintains a "Buy" rating for QFIN US and 3660 HK with target prices of $37.20 and HKD 143.40 respectively [9]. Core Insights - QFIN's 3Q24 performance exceeded expectations with revenue of RMB 4.37 billion, a quarter-on-quarter increase of 5.1% and a year-on-year increase of 2.1%. Net profit reached RMB 1.80 billion, reflecting a quarter-on-quarter increase of 30.6% and a year-on-year increase of 57.9% [3][4]. - The company announced a share repurchase plan of $450 million for 2025, indicating a commitment to shareholder returns [3]. - Loan quality has stabilized, with a decrease in overdue rates and an increase in loan disbursement volume, suggesting a potential return to normal operational strategies [3][5]. Financial Performance - In 3Q24, the loan disbursement volume was RMB 82.4 billion, marking a quarter-on-quarter increase of 13.1% and a year-on-year decrease of 14.9%. The loan balance was RMB 127.7 billion, with a quarter-on-quarter increase of 3.4% [4]. - The net take rate improved to 12.2% in 3Q24, up from 10.2% in 2Q24, driven by lower funding costs and the cessation of low-margin businesses [4]. - The company expects to achieve its net profit guidance of RMB 1.75-1.85 billion for 3Q24, supported by macroeconomic stabilization and prudent operational management [5]. Earnings Forecast - The report adjusts the forecast for attributable net profit for 2024, 2025, and 2026 to RMB 6.15 billion, RMB 6.34 billion, and RMB 6.62 billion respectively, reflecting an increase of 13.7% for 2024 [6]. - Target prices for QFIN US and 3660 HK have been raised to $37.20 and HKD 143.40 based on PE and DCF valuation methods [6][19]. Valuation Methodology - The target price is derived from a combination of DCF and PE valuation methods, with the PE valuation based on an average of 6x for 2025 [19][20]. - The DCF analysis incorporates a three-stage model, projecting net profits and capital returns over the next several years [20][21]. Key Financial Metrics - The report provides a detailed breakdown of financial metrics, including projected revenues, net profits, EPS, PE ratios, and ROE for the years 2022 to 2026 [27]. - For 2024, the projected EPS is RMB 42.39, with a PE ratio of 5.53, indicating a favorable valuation compared to historical performance [27].

User Growth and Engagement - As of September 30, 2024, the platform has connected with 162 financial institution partners and 254.3 million consumers with potential credit demand, an increase of 11.6% from 227.9 million a year ago[4] - The cumulative number of users with approved credit limits reached 55.2 million, up 12.2% from 49.2 million as of September 30, 2023[4] - The cumulative number of successful borrowers reached 33.1 million, reflecting a 12.6% increase from 29.4 million as of September 30, 2023[4] Financial Performance - Net income for Q3 2024 was RMB 4,370.2 million (USD 622.7 million), compared to RMB 4,281.0 million in the same period of 2023[7] - Operating profit for Q3 2024 was RMB 2,289.2 million (USD 326.2 million), up from RMB 1,388.9 million in Q3 2023[7] - Total revenue for Q3 2024 was RMB 43.7 billion (USD 6.2 billion), an increase from RMB 42.8 billion in Q3 2023 and RMB 41.6 billion in the previous quarter[11] - Non-GAAP net profit for Q3 2024 reached RMB 18.3 billion, reflecting strong financial performance despite challenging macro conditions[9] - The net profit attributable to ordinary shareholders for the nine months ended September 30, 2024, was RMB 4,347,677, up from RMB 3,173,596 in the same period of 2023, reflecting a growth of approximately 37%[45] Profitability Metrics - The net profit margin for Q3 2024 was 41.2%, with a non-GAAP net profit margin of 41.8%[7] - The company’s basic earnings per share for the three months ended September 30, 2024, was RMB 6.20, up from RMB 3.56 in the same period of 2023[45] - The company’s diluted earnings per share for the nine months ended September 30, 2024, was RMB 14.11, compared to RMB 9.61 for the same period in 2023, reflecting a growth of approximately 47%[45] Operational Efficiency - Operating costs and expenses totaled RMB 2,081.0 million (USD 296.5 million), down from RMB 2,892.2 million in Q3 2023[12] - The operating profit margin for the three months ended September 30, 2024, improved to 52.4% from 32.4% in the same period of 2023, showcasing enhanced operational efficiency[55] Cash Flow and Liquidity - Cash and cash equivalents totaled approximately RMB 97.7 billion, with operating cash flow of RMB 23.7 billion as of the end of Q3 2024[9] - The cash and cash equivalents at the end of September 30, 2024, were RMB 6,541,857 thousand, down from RMB 8,005,398 thousand at the end of the previous year, indicating a decrease in liquidity[48] - Net cash generated from operating activities for the three months ended September 30, 2024, was RMB 2,371,822 thousand, representing a significant increase compared to RMB 1,243,893 thousand for the same period in 2023[48] Risk Management and Credit Quality - The 90-day+ delinquency rate for loans on the platform was 2.72% as of September 30, 2024[4] - The first-day overdue rate was 4.6%, while the 30-day recovery rate reached approximately 87.4%, marking the best level in the past three years[9] - The provision for receivables was RMB 477.5 million (USD 68.0 million), a decrease from RMB 509.0 million in the same period of 2023 and RMB 849.5 million in the previous quarter[15] Shareholder Returns - The company announced a new share repurchase plan of USD 450 million for 2025[3] - The company executed a share repurchase plan totaling USD 350 million, with a new plan approved for USD 450 million, demonstrating commitment to shareholder returns[9] Future Outlook - The company expects net profit for Q4 2024 to be between RMB 1.75 billion and RMB 1.85 billion, reflecting a year-on-year growth of 57% to 65%[29] - The company plans to continue its market expansion and invest in new product development to sustain growth momentum in the upcoming quarters[57] - The company plans to maintain a prudent approach in its business planning due to ongoing macroeconomic uncertainties[29] Non-GAAP Financial Metrics - The company uses non-GAAP financial metrics to assess operational performance, excluding stock-based compensation expenses[38] - Non-GAAP operating income is defined as operating income excluding stock-based compensation expenses, providing insights into business trends[38] - The company emphasizes that non-GAAP financial data should be viewed as supplementary to GAAP results, not as a substitute[38] - The company believes that non-GAAP metrics enhance understanding of past performance and future outlook[38]

Investment Rating - The report does not explicitly provide an investment rating for the company [1][2][3] Core Arguments - The report alleges that the company has been falsifying its SEC financials to portray the business as more profitable than it actually is [6] - The report claims that the company has been using related-party transactions to shift costs and manipulate profit statements [7][8][9] - The report suggests that the company has been manipulating its profit by under-provisioning for bad debts, despite increasing delinquency rates [12][13][14] - The report highlights a significant discrepancy between the company's reported profits and the profits reported to the State Administration for Industry and Commerce (SAIC) [4][5] - The report criticizes the company's controlling shareholder, Zhou Hongyi, for a history of actions that allegedly harm public shareholders' interests [16][18][19][20] Company Overview - The company, formerly known as "360 DigiTech," rebranded as "Qifu Technology" in 2023 [1] - The company is widely recognized by its brand name "360 Jietiao," which was recently renamed to "Qifu Jietiao" [3] - Zhou Hongyi, the former chairman of the board, resigned in August 2024 for "personal reasons" [3] Financial Discrepancies - The company reported a net income of 4 billion RMB to the SEC in 2022, while the SAIC data showed a net income of only 3.15 million RMB for the same year, a difference of 1271 times [4] - In 2023, the company reported a net income of 4.27 billion RMB to the SEC, while the SAIC data showed a net income of 3.08 million RMB, a difference of 1384 times [4] - The report highlights a significant discrepancy in total revenues reported to the SEC and SAIC, with a 23.1% difference in 2022 and a 17.2% difference in 2023 [5] Related-Party Transactions - The company has engaged in significant related-party transactions with Shanghai Qibutianxia, a subsidiary controlled by Zhou Hongyi [7][8] - The report alleges that Shanghai Qibutianxia has a large number of employees (5000-9999 or over 10,000) but no discernible business operations, suggesting that the company may be using it to shift employee costs [10][11] - The company's employee count increased from 2129 in 2021 to 3121 in 2023, while Shanghai Qibutianxia's employee count remained significantly higher [11] Profit Manipulation - The company's bad debt provisions accounted for 55% of total operating expenses in 2022 and 50% in 2023, making it a significant factor in profit manipulation [12] - The 90-day delinquency rate increased from 2.03% in 2022 to 3.40% in Q2 2024, indicating deteriorating loan quality [12][13] - Despite a 33% increase in accounts receivable from 2022 to 2023, the company reduced its bad debt provisions by 12% [13][14] - The company's cash and cash equivalents decreased by 2.1 billion RMB from 2022 to H1 2024, despite reported revenue and net income growth [15] Controlling Shareholder's History - Zhou Hongyi has a history of actions that allegedly harm public shareholders' interests, as seen in his other listed companies, LUDASHI and 360 [16][18][19] - LUDASHI's stock price surged due to a special dividend announcement but plummeted after Zhou Hongyi's controlled entity sold a significant portion of its shares and the dividend plan was canceled [18] - 360's stock price experienced a significant decline after its re-listing in China, despite an initial surge [19] - The report estimates that insiders have sold over 230 million USD worth of shares since 2020 [20] Conclusion - The report concludes that the company's stock is likely to experience a significant decline, similar to the performance of Zhou Hongyi's other listed companies [20]

Investment Rating and Target Price - The report initiates coverage on Qifu Technology-S (3660 HK) with a "Buy" rating and a target price of HKD 114.30 [1] - The target price is derived from the average of PE (6.5x 2024E PE) and DCF (50-year forecast period, cost of equity 22.6%) valuation methods [2] Core Business Overview - Qifu Technology is a leading consumer credit platform in China, with a loan balance of RMB 157.8 billion and 250 million registered users as of 2Q24 [2] - The company primarily offers small-ticket (average loan size of RMB 7,500) and short-term (average contract duration of 10 months) internet consumer credit products [2] - The proportion of capital-light loans (where the company does not bear credit risk) has been increasing, reaching 65% of total loan issuance in 2Q24 [3] Loan Quality and Profitability - Loan quality has improved, with the first-day delinquency rate slightly decreasing to 4.8% in 2Q24 (from 4.9% in 1Q24) and the 30-day collection rate rising to 86.3% (from 85.1% in 1Q24) [4] - The improvement in loan quality led to a provision reversal of RMB 480 million in 2Q24, contributing to a higher net profit take rate of 3.4% (up from 2.6% in 1Q24) [4] - The company expects 3Q24 net profit to be between RMB 1.5-1.6 billion, representing a 9-16% sequential increase [4] Financial Projections - The report forecasts net profit attributable to shareholders of RMB 5.41 billion, RMB 6.58 billion, and RMB 7.18 billion for 2024, 2025, and 2026, respectively [2] - Loan issuance volume is expected to decline by 15% in 2024, followed by 5% growth in both 2025 and 2026 [9] - The provision-to-income ratio is projected to decrease to 25.1%, 22.2%, and 21.9% in 2024, 2025, and 2026, respectively [9] Capital Structure and Shareholder Returns - Qifu Technology has utilized USD 211 million of its USD 350 million share repurchase program as of 2Q24 [2] - The company expects a dividend payout ratio of 29% and a dividend yield of 5.4% for 2H24, consistent with 2023 levels [2] Industry and Regulatory Environment - The internet finance industry has entered a phase of normalized regulation, with most major issues in platform companies' financial businesses having been rectified [37] - Regulatory uncertainty has decreased, and the focus has shifted to improving the level of normalized financial supervision [37] - The Small Loan Company Supervision and Management Interim Measures (Draft for Comment) issued in August 2024 further clarified regulatory requirements, including a minimum 30% co-lending ratio and the establishment of a risk classification system [38]

Investment Rating - The report maintains an "Accumulate" rating for the company with a target price of HKD 115.43, corresponding to a P/E ratio of 6.2x for 2024 [3]. Core Views - Profit growth is driven by an increase in take rate, a decrease in financing costs, and improved risk metrics, with the take rate being the primary factor for the profit increase [3]. - The company reported a revenue of RMB 8.313 billion for H1 2024, a year-on-year increase of 10.64%, and an adjusted net profit of RMB 2.618 billion, up 23.33% year-on-year [3]. - The report highlights that the company's risk indicators have improved, and financing costs have decreased, leading to an upward adjustment of the adjusted net profit forecasts for 2024-2026 to RMB 5.6 billion, RMB 6.2 billion, and RMB 7.1 billion respectively, reflecting year-on-year growth rates of 26%, 11%, and 15% [3]. Summary by Sections Financial Performance - For Q2 2024, the company achieved a revenue growth of 6.29%, primarily due to a 42% increase in financing income to RMB 1.69 billion, driven by an increase in on-balance sheet loan balances [3]. - The adjusted net profit for Q2 2024 was RMB 1.413 billion, a 23% increase year-on-year, attributed to the expansion of the take rate, which reached 4.4% in Q2 2024 compared to 3.3% in Q2 2023 [3]. - The company’s on-balance sheet loan balance was RMB 157.8 billion, down 14.5% year-on-year [3]. Risk and Management - The report indicates that the company is focusing on risk management and operational efficiency optimization, which is expected to contribute to profit growth in the future [3]. - The company is also progressing with a USD 350 million share repurchase plan, which reflects management's confidence in the company's future [3]. Market Data - The current stock price is HKD 84.45, with a market capitalization of HKD 27.577 billion [5]. - The stock has traded within a range of HKD 53.40 to HKD 84.45 over the past 52 weeks [5].

Investment Rating - The report does not explicitly state the investment rating for Qifu Technology Inc (3660 HK) Core Insights - Qifu Technology reported a 6.3% year-on-year increase in revenue to RMB 4.16 billion and a 23.3% year-on-year increase in net profit to RMB 1.413 billion for Q2 2024 [2][6] - The return on equity (ROE) for Q2 2024 was 25.4%, up approximately 3 percentage points year-on-year [2][6] - The company has repurchased 10.7 million ADSs, achieving over 60% of its target repurchase amount of up to $350 million within 12 months, with an average repurchase price of $19.7 per ADS [2][6] Summary by Sections Financial Performance - Revenue for Q2 2024 was RMB 4.16 billion, a 6.3% increase year-on-year, while net profit reached RMB 1.413 billion, reflecting a 23.3% increase year-on-year [2][6] - The net take rate improved to 4.4%, up 0.9 percentage points quarter-on-quarter and 1.1 percentage points year-on-year [2][6] - The average internal rate of return (IRR) for Q2 2024 was 21.6%, a slight increase of 0.1 percentage points quarter-on-quarter [2][6] User and Loan Metrics - The cumulative number of users approved for credit lines increased by 1.3 million quarter-on-quarter to 53.6 million, marking a 13.1% year-on-year growth [3][6] - New loan originations in Q2 2024 totaled RMB 95.4 billion, down 23.2% year-on-year and 3.8% quarter-on-quarter, with platform services contributing 64.9% of the total [3][6] - The 90-day delinquency rate was 3.4%, while the 30-day recovery rate improved by 1.2 percentage points quarter-on-quarter to 86.3% [3][6] Outlook - The company expects net profit for Q3 2024 to be between RMB 15.5 billion and RMB 16.5 billion, representing a year-on-year increase of 31% to 40% [4][6] - Loan IRR is anticipated to fluctuate around 21.6% [4][6] - Asset quality indicators are expected to continue improving in Q3 2024, with potential for additional loan loss provisions [4][6]

Financial Performance - Total revenue for Q2 2024 was RMB 4,160.1 million (USD 572.4 million), an increase from RMB 3,914.3 million in the same period of 2023[12]. - Non-GAAP net profit for Q2 2024 was RMB 1,413.4 million (USD 194.5 million), compared to RMB 1,146.6 million in Q2 2023, reflecting a year-over-year growth of approximately 23.3%[12]. - Operating income was RMB 1,985.0 million (USD 273.1 million), compared to RMB 1,181.5 million in the same period last year, showing significant growth[16]. - Net profit was RMB 1,376.5 million (USD 189.4 million), an increase from RMB 1,093.4 million year-over-year, reflecting strong financial performance[17]. - The net profit margin for Q2 2024 was 33.1%, indicating a healthy profitability level for the company[18]. - The company reported a significant reduction in customer acquisition costs due to diversified channels and prudent strategies[11]. - The company’s diluted earnings per American Depositary Share (ADS) were RMB 8.92 (USD 1.22) for the period[19]. - The company’s non-GAAP diluted earnings per ADS were RMB 9.16 (USD 1.26), reflecting strong operational performance[20]. - For Q3 2024, the company expects to generate a net profit of RMB 1.5 billion to RMB 1.6 billion, and a non-GAAP net profit of RMB 1.55 billion to RMB 1.65 billion, representing a year-on-year growth of 31% to 40%[28]. Loan and Borrower Statistics - As of June 30, 2024, the platform has connected with 160 financial institution partners and 247.6 million consumers with potential credit demand, an increase of 12.2% from 220.6 million last year[9]. - The cumulative number of users with approved credit limits reached 53.6 million, up 13.0% from 47.4 million as of June 30, 2023[9]. - The number of borrowers who successfully withdrew funds (including repeat borrowers) was 32.0 million, a 12.3% increase from 28.5 million as of June 30, 2023[9]. - In Q2 2024, financial institution partners initiated 19,112,187 loans through the platform, with a total loan volume of RMB 95,425 million, a decrease of 23.2% from RMB 124,225 million in the same period last year[9]. - The loan volume initiated under the light capital model, Intelligent Credit Engine (ICE), and other technology solutions amounted to RMB 61,905 million, representing 64.9% of the total initiated amount, down from RMB 71,860 million or a decrease of 13.9% year-on-year[9]. - The total outstanding loan balance was RMB 157,778 million, a decrease of 14.5% from RMB 184,459 million as of June 30, 2023[9]. - The outstanding loan balance under the light capital model, ICE, and other technology solutions was RMB 103,817 million, down 9.6% from RMB 114,835 million as of June 30, 2023[9]. - The 90-day+ delinquency rate for loans initiated by financial institutions on the platform was 3.40% as of June 30, 2024[9]. - The loan refinancing volume for Q2 2024 was 93.0%[9]. Cash Flow and Financial Position - The operating cash flow for the quarter was approximately RMB 19.6 billion, indicating strong cash generation capabilities[12]. - The total cash and cash equivalents at the end of the quarter amounted to approximately RMB 84.9 billion, providing a solid financial foundation for future opportunities[12]. - Cash and cash equivalents rose from RMB 4,177,890 thousand to RMB 6,337,134 thousand, an increase of 51.7%[41]. - The cash generated from operating activities for the three months ended June 30, 2024, was RMB 1,961,616, an increase of 11.3% compared to RMB 1,761,575 in the same period of 2023[45]. - The company’s cash flow from operating activities showed a significant increase, indicating improved liquidity and operational efficiency[44]. Expenses and Cost Management - Sales and marketing expenses were RMB 366.4 million (USD 50.4 million), a decrease from RMB 436.5 million in the same period last year, reflecting a more cautious customer acquisition approach[15]. - General and administrative expenses were RMB 95.1 million (USD 13.1 million), down from RMB 112.8 million year-over-year, indicating improved operational efficiency[15]. - Operating costs and expenses for the six months ended June 30, 2024, decreased to RMB 4,964,159 thousand from RMB 5,324,968 thousand, a reduction of 6.8%[43]. Shareholder Returns and Dividends - The company has approved a semi-annual dividend of $0.30 per Class A ordinary share and $0.60 per American Depositary Share for the first half of 2024, with payment dates expected on October 29, 2024, and around November 1, 2024, respectively[26]. - As of August 13, 2024, the company has repurchased approximately 10.7 million American Depositary Shares at a total cost of about $211 million, averaging $19.7 per share, under a buyback plan authorized for up to $350 million[27]. Leadership and Governance - The board appointed Zhao Fan as the new chairman and Liu Xiangge as an independent director, effective August 13, 2024, indicating a strategic leadership change[24]. Asset and Liability Management - Total assets increased from RMB 45,818,572 thousand to RMB 46,983,049 thousand, representing a growth of 2.54%[41]. - Total liabilities increased from RMB 23,808,715 thousand to RMB 24,350,070 thousand, a rise of 2.27%[41]. - The total equity attributable to shareholders rose from RMB 21,937,483 thousand to RMB 22,568,768 thousand, an increase of 2.87%[41]. Accounting and Financial Reporting - The company follows the CECL model for expected credit losses, adjusting provisions based on estimated values at the initiation or acquisition of financial assets[68]. - The actual interest rate on receivables is calculated using the effective interest method, considering all contractual terms and estimated cash flows over the loan's expected term[69]. - The company recognizes share-based compensation expenses using the straight-line method, with reported income of RMB 49,337 thousand and RMB 11,971 thousand for the six months ending June 30, 2023, and 2024, respectively[69]. - Financial guarantees are accounted for under ASC 326, with provisions recognized at the start of the guarantee and subsequently amortized over the guarantee period[69]. - The company adopts a policy to recognize income from guaranteed premiums monthly, as service fees are collected in installments rather than upfront[69].