乐信（LX）：3Q24质量好转，未来盈利修复空间大

Investment Rating - The report upgrades LexinFintech's (LX US) rating from "Overweight" to "Buy" with a target price of USD 5.00 [1][8] Core Views - LexinFintech's 3Q24 net profit attributable to shareholders reached RMB 310 million, a YoY decrease of 16% but a QoQ increase of 37% [1] - The improvement in loan quality exceeded market expectations, with the first-day delinquency rate dropping by 9% QoQ [1] - The company's risk control upgrades are showing results, and credit costs are expected to continue declining, driving a 74% profit growth in 2025 [1] - The net take rate increased to 1.1% in 3Q24, driven by lower funding costs, marketing expenses, and credit costs [3] - The company's funding cost decreased by 98bps QoQ to 4.28%, with further room for reduction compared to peers' 3-4% funding costs [3] - The net take rate is expected to rise to 1.9% in 2025, supported by improved loan quality and increased light capital business [3][13] Loan Quality and Risk Control - Leading risk indicators improved in 3Q24, with the first-day delinquency rate for new loans (FPD 7) decreasing by 13% QoQ [2] - The provision and fair value changes as a percentage of new loans slightly decreased to 3.15% in 3Q24 (2Q24: 3.19%) [2] - The credit cost ratio is expected to drop to 2.3% in 2025 (previous: 2.5%) due to improved leading indicators [2] Loan Volume and Business Strategy - New loan issuance in 3Q24 was RMB 51 billion, flat QoQ, reflecting a cautious business strategy [4] - Loan volume is expected to recover in 2H25, with full-year 2025 loan volume projected to increase by 10% YoY [4] - The company launched a light capital digital distribution platform (ICP) in 3Q24, and the light capital business is expected to account for 30% of total business in the next 1-2 quarters [4] - Light capital revenue is expected to grow by 44% YoY in 2025 (previous: 21%) [4] Profit and Valuation Forecast - The report raises the 2024/2025/2026 net profit forecasts to RMB 1.1/1.9/2.3 billion, representing adjustments of +17.0%, +45.0%, and +28.3%, respectively [5][13] - The 2025E PB valuation discount is reduced, with a target PB of 0.5x (previous: 0.23x), based on a 2025E net take rate of 1.9% [5][14] - The target price is raised to USD 5.0 (previous: USD 2.1) [5][14] Financial Metrics - Revenue and other income for 2024E/2025E/2026E are projected at RMB 14.2/15.0/15.9 billion, with YoY growth rates of 9.0%, 5.2%, and 6.0%, respectively [6][23] - EPS for 2024E/2025E/2026E is forecasted at RMB 6.49/11.30/13.87, with PE ratios of 4.77x, 2.74x, and 2.23x, respectively [6][23] - ROE for 2025E/2026E is expected to reach 16.74% and 18.01%, respectively [6][23]