Investment Rating - The investment rating for the company is "Buy" for both US and HK stocks [6]. Core Insights - The company experienced a slight fluctuation in risk during 2Q25, with loan volume decreasing by 4.8% quarter-on-quarter to 84.6 billion RMB, and net profit attributable to shareholders decreasing by 3.7% to 1.73 billion RMB [1][2]. - The implementation of the "New Regulations on Internet Lending" on October 1 is expected to be the biggest uncertainty for the industry, potentially affecting business models and profitability, but may lead to a more optimized competitive environment in the long term as non-compliant small platforms are phased out [1][3]. - The company aims to provide stable shareholder returns, having utilized 277 million USD of its 450 million USD buyback plan as of August 14 [3]. Loan Quality - In 2Q25, the risk slightly increased, with C-M2 rising to 0.64% (from 0.60% in 1Q25), and the first-day overdue rate increasing to 5.1% (from 5.0% in 1Q25) [2]. - The 30-day repayment rate decreased to 87.3% (from 88.1% in 1Q25), indicating potential short-term volatility in risk due to liquidity tightening from the new regulations [2]. Loan Volume - The new loan volume in 2Q25 was 84.6 billion RMB, reflecting a quarter-on-quarter decrease of 4.8% but a year-on-year increase of 16.1% [2]. - The company has reduced its light capital loan volume ratio to 41% (from 49% in 1Q25), indicating a more cautious approach from funding sources [2]. Funding Costs - Current funding costs are at a relatively low level, with limited potential for significant further reductions in the future [2]. Profit Forecast and Valuation - The company maintains its net profit forecasts for 2025, 2026, and 2027 at 6.93 billion RMB, 7.49 billion RMB, and 7.93 billion RMB respectively [4]. - The target prices are set at 53.7 USD for US stocks and 210.5 HKD for HK stocks, based on a PE of 6.5x for 2025 [4][10].

Investment Rating - The investment rating for the company is "Buy" with a target price of $13.00, indicating a potential upside of 50.3% from the current price of $8.65 [1][12]. Core Insights - The company's net profit for Q2 2025 was 751 million RMB, exceeding Bloomberg's expectations by 4%, with a year-on-year growth of 36.3% and a quarter-on-quarter increase of 1.9% [2]. - Revenue for Q2 2025 grew by 12.9% year-on-year and 2.8% quarter-on-quarter, with a stable take rate of 3.4% in mainland China [2]. - The company maintains its guidance for a revenue growth of 10-15% year-on-year for 2025 [2]. - The international business segment continues to grow, with a year-on-year increase of 41.5% in revenue, contributing to 22.3% of total revenue [6]. Financial Performance - For the fiscal year ending December 31, 2025, the company is projected to achieve a revenue of 13,825 million RMB, reflecting a year-on-year growth of 5.8% [5][13]. - The net profit for the same period is expected to be 2,678 million RMB, with a year-on-year growth of 12.4% [5][13]. - The company's earnings per share (EPS) for 2025 is estimated at 11.00 RMB, representing a growth of 14.7% [5][13]. Business Growth - The facilitated loans in Q2 2025 increased by 10.9% year-on-year, with international market loans growing by 39.1% [6]. - The company issued convertible bonds in June to support international business expansion, with an expected profit contribution of no less than $15 million from international operations in 2025 [6]. - The asset quality remains stable, with a 90-day delinquency rate of 1.92%, showing a slight improvement from the previous quarter [6]. Market Position - The company's market capitalization is approximately $1.21 billion, with a year-to-date stock price change of 27.39% [4]. - The stock has a 52-week high of $10.72 and a low of $5.18, indicating significant volatility [4].

Core Viewpoint - The "New Lending Regulations" have impacted the performance and strategies of leading lending institutions, with each showing distinct growth trajectories and challenges. Group 1: Company Performance - Xinyi Technology reported a net income of 3.578 billion RMB for Q2, a year-on-year increase of 12.94%, and a net profit of 751 million RMB, up 36.35% [1] - Q2 loan facilitation service fees contributed significantly to revenue growth, reaching 1.515 billion RMB, a 36.45% increase year-on-year, driven by expanded transaction volume and higher average service fees [1] - Q2 loan balance for Xinyi Technology was 77.5 billion RMB, a year-on-year growth of 18.1%, with domestic loans at 75.4 billion RMB (up 17.4%) and overseas loans at 2.1 billion RMB (up 50.0%) [1][3] - Q2 revenue for Qifu Technology was 5.216 billion RMB, a 25.38% increase year-on-year, with a net profit of 1.731 billion RMB, up 25.72% [2] - Qifu Technology's total loan facilitation and issuance reached 84.609 billion RMB, a 16.1% increase year-on-year [6] - Lexin's total revenue for Q2 was 3.587 billion RMB, down 1.5% year-on-year, while net profit increased by 126% to 511 million RMB [2][4] Group 2: Market Trends and Strategies - The "New Lending Regulations" have led to tighter funding supplies and increased costs for lending institutions, prompting Lexin to adjust its business model by shifting from light capital to heavy capital modes [7][8] - Lexin's light capital model accounted for 20% of GMV in Q2, down from 27% in Q1, while heavy capital mode increased from 73% to 80% [7] - Qifu Technology's user base grew significantly, with over 60 million borrowers, a 12.3% increase year-on-year, and a high repeat borrowing rate of 93.8% [2] - Xinyi Technology's international business revenue reached 796.7 million RMB in Q2, a 41.5% increase year-on-year, representing 22.3% of total revenue [2][3] Group 3: Risk Management - Lexin's non-performing loan rate was the highest among the three companies at 3.1% [5] - Both Lexin and Qifu Technology have increased their provisions to enhance risk buffers, with Lexin raising provisions by 13.6% to 1.04 billion RMB, achieving a coverage ratio of 270% [9] - Qifu Technology's provision coverage ratio reached a historical high of 662% [9]

Core Insights - Q2 2025 performance of Qifu Technology shows revenue of 5.216 billion, a year-on-year increase of 25.38% and a quarter-on-quarter increase of 11.2% [1] - Net profit for the same period is 1.731 billion, reflecting a year-on-year increase of 25.72% but a quarter-on-quarter decrease of 3.68% [1] Financial Performance - Total loan facilitation in Q2 reached 84.609 billion, a quarter-on-quarter decrease of 4.81% but a year-on-year increase of 16.12% [2] - As of June 30, 2025, the loan balance stood at 1400.80 billion, showing a slight decrease from 1402.73 billion at the end of March but a year-on-year increase of 13.38% from 1235.51 billion [3] Business Strategy - Qifu Technology's strategy remains cautious, with a focus on balancing growth and risk [4] - The company has diversified its business model, allowing for flexibility in asset allocation between heavy and light capital [5] Revenue Breakdown - In Q2, revenue from heavy capital loan facilitation reached 0.461 billion, a year-on-year increase of 205.1% [7] - Financing income accounted for the largest share of total revenue at 2.205 billion, representing 42% of total revenue [10] - The company issued bonds totaling 14.4 billion in the first half of 2025, a 45% increase year-on-year [12] Regulatory Impact - The "Assisted Loan New Regulations" are expected to have a positive long-term impact on the industry, promoting a healthier ecosystem [13][14] - Qifu Technology is preparing alternative plans in response to the new regulations, ensuring compliance and operational stability [20][21] International Expansion - Qifu has initiated small-scale operations in the UK, with positive early indicators [24] - The company aims to understand local markets and refine its risk models as part of its international strategy [25] Cost Management - Customer acquisition costs decreased to 370 yuan in Q2 from 384 yuan in the previous quarter [30] - Marketing expenses increased to 6.63 billion, a 12% quarter-on-quarter rise [33] Risk Management - The company has increased its risk provisions, with new provisions for risk-bearing loans totaling approximately 2.5 billion in Q2 [8] - The D1 delinquency rate remained stable, but recovery rates declined from 88.1% to 87.3% [35] - Qifu is tightening risk management measures in response to industry-wide pressures and regulatory changes [42][43] Future Outlook - The company maintains a cautious outlook due to ongoing macroeconomic uncertainties, projecting Q3 net profit between 1.52 billion and 1.72 billion, reflecting a potential year-on-year decline [44][45]

Core Viewpoint - The implementation of the new regulations on internet lending by the National Financial Regulatory Administration is causing a significant shift in the lending landscape, with banks and consumer finance companies reallocating resources towards compliant platforms while trust and commercial insurance funds are stepping in to fill the funding gaps left by traditional lenders [2][4][6]. Group 1: Regulatory Impact - The new regulations require banks to clearly define service fees and comprehensive financing costs in their agreements with lending platforms, directly addressing the high-cost lending issues in the industry [4][5]. - The regulations have led to a clear segmentation in the lending market, with high-interest lending platforms facing rejection from banks and consumer finance companies, while those with lower rates are experiencing intense competition [6][7]. Group 2: Funding Sources - Trust funds, previously sidelined due to cost disadvantages, are becoming increasingly active in the consumer finance market as traditional funding sources tighten [9][10]. - Trust companies are focusing on high-quality asset packages, particularly those associated with leading lending platforms, as they seek to mitigate risks while capitalizing on competitive returns [11][12]. Group 3: Alternative Financing Channels - In addition to trust funds, commercial factoring and financing leasing companies are being considered as alternative funding sources, although their capacity to fill the gaps is limited due to regulatory constraints [14][15]. - The regulatory environment is tightening around commercial factoring and financing leasing, which may further restrict their ability to engage in consumer lending activities [16][17].

Core Viewpoint - The implementation of the "New Lending Regulations" by the National Financial Regulatory Administration is causing a significant shift in the lending industry, leading to a migration of funds and a restructuring of partnerships between banks and compliant lending platforms [1][3]. Group 1: Impact of New Regulations - The new regulations require banks to clearly define service fees and financing costs in their agreements with lending platforms, directly addressing the high-cost lending issue [3][4]. - Lending platforms are now categorized based on their scale, with those above 60 billion yuan generally offering lower interest rates (below 24%), while smaller platforms often maintain higher rates (up to 36%) [3][5]. - The regulations have led to a significant reduction in funding for high-interest lending institutions, with many being excluded from bank partnerships due to high credit risks and regulatory pressures [5][6]. Group 2: Funding Sources and Trends - As banks tighten their funding, trust companies and commercial factoring firms are emerging as alternative funding sources for lending institutions facing capital shortages [6][8]. - Trust funds, which had previously retreated from the mainstream lending market, are becoming more active again due to the reduced supply from smaller banks and private banks [9][10]. - The cost of trust funding is generally higher than that of banks, with rates around 5.5% plus additional fees, leading to a total cost of 6% to 7% [11]. Group 3: Challenges in Alternative Funding - Commercial factoring companies are also being considered for funding, but their ability to provide significant capital is limited due to regulatory constraints and their focus on traditional receivables [13][14]. - The regulatory environment is tightening around both factoring and financing leasing companies, which may further limit their participation in consumer lending [15]. - The overall trend indicates that while there is a search for alternative funding sources, the landscape is becoming increasingly competitive and regulated, making it challenging for smaller lending platforms to secure necessary capital [12][15].

Group 1 - The new regulations for online lending services, known as "助贷新规," will be fully implemented in less than 50 days, requiring commercial banks to clearly define service fees and include them in the borrower's comprehensive financing costs [1][28][29] - The regulations effectively cap the annualized interest rate for lending services at 24%, signaling the end of the traditional "双融担" model [2][28] - Some institutions are adapting to the new regulations by shifting to models like "24% + equity" or "24% + notarization," while others, such as the well-known lending platform CreditFly, continue to charge an annualized interest rate cap of 36% [3][28] Group 2 - CreditFly has faced numerous user complaints regarding its high interest rates, with reported comprehensive borrowing costs reaching 35.99%, where the interest rate itself only accounts for 5.5% [4][8][13] - Users have reported that CreditFly's service agreements lack transparency, with significant fees hidden in the fine print, leading to confusion about the actual costs associated with borrowing [12][15][18] - The platform's membership services include automatic renewal clauses, which have led to complaints about unexpected charges and lack of user control over subscription renewals [25][27] Group 3 - CreditFly has been listed among the cooperative institutions of two financial entities, indicating its ongoing operations despite the impending regulatory changes [30][31] - The company claims to prioritize consumer rights protection, with a dedicated committee and high customer service satisfaction rates, yet there are concerns about its compliance with the new regulations [31][32]

Investment Rating - The investment rating for the company is "Buy" with a target price of $12.00 [8][9]. Core Insights - The company's net profit for Q2 2025 reached 510 million RMB, showing a year-on-year increase of 126% and a quarter-on-quarter increase of 19%, aligning with the company's guidance for significant profit growth this year [1]. - The net profit take rate (NTR) improved to 1.92% from 1.59% in Q1 2025, driven by increased revenue from light capital and e-commerce businesses [1]. - The company has announced a share repurchase plan of $50 million and a management buyback plan of $10 million, indicating a commitment to shareholder returns [1]. - The main uncertainty for the future is the potential impact of the new lending regulations on the industry, which could affect profitability and loan risk performance [1]. Summary by Sections Quality - Risk indicators have shown continuous improvement, with a 2% decrease in the first-day overdue rate and a 5% decrease in the first payment default (FPD) rate for new loans [2]. - The company has been upgrading its risk control system since early 2024, and the improving loan quality is gradually validating these efforts [2]. - Despite positive forward-looking risk indicators, the company remains cautious in provisioning, with credit costs increasing by 13.6% quarter-on-quarter [2]. Scale - New loan issuance slightly increased to 5.29 billion RMB, reflecting a year-on-year growth of 3.5% and a quarter-on-quarter growth of 2.5% [3]. - The proportion of loans under the ICP model decreased to 15% from 24% in Q1 2025 due to stricter regulations, but the company's diversified business ecosystem helps mitigate related impacts [3]. - E-commerce GMV reached 2 billion RMB, a quarter-on-quarter increase of 80.2%, with 97% of consumers using installment services [3]. Profitability - The NTR increased to 1.92%, primarily driven by a 126 basis points increase in revenue take rate to 11.64% [4]. - Light capital income rose by 32.9% to 830 million RMB, significantly contributing to profitability [4]. - E-commerce gross profit also increased by 71% to 97 million RMB due to rapid growth in GMV [4]. - Factors negatively impacting profitability include a 27 basis points rise in funding costs to 4.2% and an increase in customer acquisition costs to 810 RMB [4]. Profit Forecast and Valuation - The company's performance is relatively stable, with minor adjustments to net profit forecasts for 2025, 2026, and 2027, now projected at 2.18 billion RMB, 3.21 billion RMB, and 3.60 billion RMB respectively [6]. - The average price-to-book (PB) ratio for comparable consumer loan platforms is estimated at 1.07x for 2025, and the company is assigned a PB of 1.15x based on its unique business ecosystem [6].

Core Viewpoint - The traditional "dual financing guarantee" model in the lending industry is being phased out due to the upcoming implementation of the "assisted lending regulations," leading to a significant reshaping of the industry as companies explore new compliance strategies to avoid regulatory pitfalls [1][2]. Group 1: Regulatory Changes - The "assisted lending regulations" set a cap on annualized interest rates at 24%, effectively rendering the previous "dual financing guarantee" model obsolete [2]. - The regulations require clear disclosure of service and guarantee fees in cooperation agreements, impacting the overall financing cost for borrowers [2]. Group 2: New Business Models - Companies are shifting towards a "24% + notarization" model, particularly in the equipment rental and auto loan sectors, as a way to navigate the regulatory landscape [1][2]. - Some rental platforms are bundling additional fees such as notarization and insurance, which increases the actual cost for users [1][3]. Group 3: Challenges in Implementation - The new notarization models face three main challenges: the judicial system's capacity to handle small, high-frequency cases, rising consumer complaints about hidden fees, and insufficient motivation for institutions to adapt under profit pressure [1][7]. - The effectiveness of "strong notarization" is being questioned, leading to the exploration of a "composite notarization" model that balances costs and risks [4][5]. Group 4: Consumer Experiences - Consumers have reported being charged additional fees on rental platforms, significantly increasing their overall costs, with one individual noting an extra cost of approximately 5,317 yuan for a rental transaction [3]. - Complaints about hidden fees are rising, with some platforms charging between 200 to 500 yuan for notarization fees [3][7]. Group 5: Industry Outlook - The industry is undergoing a critical transition from exploratory adjustments to substantial changes, with many small institutions initially attempting to repackage existing high-rate products as compliant offerings [8][9]. - The current asset scale of products with interest rates above 36% still exceeds 50%, indicating potential systemic risks if abrupt regulatory changes are enforced [9].

Core Viewpoint - The "24%+ equity" model in the lending industry is facing significant challenges as regulatory scrutiny increases, potentially leading to stricter regulations on equity services and fees [1][27]. Group 1: Overview of the "24%+ Equity" Model - The "24%+ equity" model allows borrowers to obtain consumer loans at an annual interest rate of 24% while also purchasing equity services from lending platforms or licensed consumer finance institutions [3][13]. - This model has become popular as lending institutions seek to increase non-interest income through equity services amid difficulties in earning interest spread [1][27]. Group 2: Regulatory Concerns and Industry Response - Recent regulatory notifications have prompted concerns among lending platforms and licensed consumer finance institutions about the sustainability of the "24%+ equity" model [5][6]. - The introduction of the "New Lending Regulations" in April has restricted platforms from charging interest fees in any form, raising fears that equity service fees may be viewed as disguised interest rate increases [7][11]. - Many lending institutions are preparing to exit the "24%+ equity" model, focusing instead on high-quality customer segments with interest rates below 24% [8][28]. Group 3: Financial Implications and Market Dynamics - The "24%+ equity" model has allowed some lending platforms to generate substantial revenue, with some platforms collecting hundreds of thousands of yuan in equity fees monthly [17]. - However, the model has also led to issues such as bundled sales and forced purchases, which have raised consumer complaints and could lead to increased regulatory scrutiny [19][20]. - The potential for regulatory changes has caused many lending institutions to reconsider their business strategies, with some halting plans to expand the "24%+ equity" model [25][26]. Group 4: Future Outlook - The future of the "24%+ equity" model remains uncertain, with industry players awaiting regulatory decisions that could significantly impact their operations [28]. - If the model is deemed unsustainable, lending platforms may need to adjust their focus to maintain profitability, potentially leading to a reduction in overall business scale [28][29].