Lexin(US:LX) HTSC·2025-11-25 07:14Investment Rating - The report maintains a "Buy" rating for the company with a target price of $6.00 [7]. Core Insights - The company's Q3 2025 performance showed steady results with a net profit of 510 million RMB, reflecting a year-on-year increase of 68% and a quarter-on-quarter increase of 2%. However, challenges are anticipated in Q4 2025 due to tightening loan supply and rising risks [1][4]. - The net profit take rate (NTR) increased to 2.0% in Q3 2025, primarily driven by reduced marketing expenses following a decrease in loan disbursements [1][4]. - The company is actively repurchasing shares, having utilized $25 million of its $50 million buyback plan [1]. Performance Summary Financial Performance - Q3 2025 net profit reached 510 million RMB, with a year-on-year growth of 68% and a quarter-on-quarter growth of 2% [1]. - The NTR improved to 2.0% from 1.92% in Q2 2025, attributed to lower marketing expenses [1][4]. - The company anticipates a significant decline in Q4 2025 profits to approximately 340 million RMB, a decrease of 34% from Q3 2025, due to reduced loan volumes and increased credit costs [4]. Risk Assessment - The first-day overdue rate increased slightly by 0.05% quarter-on-quarter, indicating a minor uptick in risk [2]. - The company has been cautious in provisioning, with credit costs rising by 3.9% quarter-on-quarter, now accounting for 4.15% of loan balances [2]. Loan Disbursement Trends - New loan disbursements in Q3 2025 decreased by 3.8% quarter-on-quarter to 50.9 billion RMB, primarily due to a reduction in the company's ICP business [3]. - The report forecasts a further decline in loan disbursements by approximately 10% in Q4 2025, driven by regulatory changes and increased risk aversion [3]. Valuation Adjustments - The net profit forecasts for 2025, 2026, and 2027 have been revised down to 1.81 billion RMB, 1.66 billion RMB, and 2.48 billion RMB, respectively, reflecting significant adjustments of -17.1%, -48.3%, and -31.2% [5][12]. - The target price has been adjusted down to $6.00 from $12.00, based on a revised expected price-to-book (PB) ratio of 0.53x for 2026 [5][14].