Qfin Holdings, Inc. (QFIN): A Bull Case Theory

Core Thesis - Qfin Holdings, Inc. is viewed as a compelling investment opportunity in the Chinese fintech lending sector, which has been negatively impacted by sector-wide pessimism and investor caution regarding China [2][5]. Business Model - QFIN operates a high-margin, capital-light credit-tech platform that connects financial institutions with consumers and SMEs needing small loans, generating fee income through its platform and referral services [2]. - The company's revenue is split evenly between on-balance-sheet lending and off-balance-sheet, capital-light loan facilitation, providing a SaaS-like, high-margin revenue stream [3]. Financial Performance - QFIN's fundamentals are solid, with stabilizing credit performance and a growing mix towards the higher-margin platform segment [3]. - The valuation metrics are attractive, with an EV/EBIT of 2–3× and a P/E of 3×, alongside net cash and shareholder-friendly returns through dividends (~6%) and potential buybacks [4]. Growth Potential - A conservative re-rating to a mid-cycle EV/EBIT of 5–6× suggests potential equity upside of 2–3× from current levels without needing accelerated growth [4]. Market Sentiment - Despite a cautious Q3 guide and minor quarter-over-quarter shifts, QFIN's cash engine remains intact, indicating resilience in its operations [4]. - The company is not among the 30 most popular stocks among hedge funds, with 26 hedge fund portfolios holding QFIN at the end of Q2, down from 33 in the previous quarter [7].