Qfin (QFIN): A High-Conviction Fintech Play with AI-Driven Growth and Strong Earnings Upside

In the volatile landscape of China’s credit-tech sector, where regulatory scrutiny and macroeconomic headwinds have tempered investor optimism, Qfin Holdings, Inc. (QFIN) stands out as a rare combination of robust fundamentals and forward-looking innovation. The company’s Q2 2025 results, coupled with its aggressive AI integration and capital-light strategy, present a compelling case for undervaluation. With a price-to-earnings (P/E) ratio of 3.7 and a price-to-sales (P/S) ratio of 1.5—far below the sector’s average P/E of 92.0x—QFIN offers a high-conviction opportunity for investors seeking exposure to China’s fintech renaissance [1][2].

Q2 2025: A Blueprint for Sustainable Growth

QFIN’s Q2 2025 financial results underscore its ability to scale profitably. Total net revenue surged to RMB5,215.9 million (US$728.1 million), a 11.6% increase from the prior quarter, while non-GAAP net income rose 30.8% year-over-year to RMB1,849.0 million (US$258.1 million) [1]. These figures reflect the company’s expanding market share: its 5.4% take rate—a metric of platform profitability—jumped 100 basis points year-over-year, driven by higher loan facilitation volumes. Total loan origination reached RMB84,609 million, a 16.1% year-over-year increase, as QFIN connected 275.8 million consumers with credit partners, up 11.4% from the prior year [1].

The company’s user base also grew meaningfully, with 60.2 million consumers securing approved credit lines—a 12.3% increase from 53.6 million in Q2 2024. Meanwhile, the total outstanding loan balance hit RMB140,080 million, a 13.4% year-over-year rise, signaling strong retention and demand [1]. These metrics highlight QFIN’s dual strength: scaling its platform while maintaining disciplined risk management.

AI as a Strategic Differentiator

QFIN’s AI-driven transformation is central to its competitive edge. The company has deployed an Intelligence Credit Engine (ICE), which leverages machine learning and cloud computing to enhance credit underwriting and risk assessment. In Q2 2025, ICE accounted for 41.4% of total loan volume, a testament to its efficacy in reducing defaults and improving operational efficiency [1]. By automating decision-making, QFIN has reduced reliance on manual processes, cutting costs and accelerating loan approvals—a critical advantage in a sector where speed and accuracy are paramount.

Analysts note that QFIN’s AI investments are not merely incremental but transformative. “The ICE represents a paradigm shift in credit-tech,” argues a Tipranks analyst, “enabling QFIN to serve non-prime borrowers with precision while maintaining profitability” [3]. This aligns with broader trends in China’s financial sector, where regulators increasingly favor technology-driven solutions to expand financial inclusion.

Valuation Discrepancy: A Sector Out of Sync

Despite QFIN’s strong performance, its valuation remains disconnected from fundamentals. While the China credit-tech sector trades at a bloated P/E of 92.0x—driven by speculative bets on long-term growth—QFIN’s P/E of 3.7 and P/S of 1.5 suggest it is priced for near-term pessimism rather than its demonstrated earnings power [1][2]. This divergence is puzzling, particularly given QFIN’s capital-light model and consistent cash flow generation.

The disconnect may stem from sector-wide challenges, including rising interest rates and regulatory uncertainty. However, QFIN’s prudent financial management—evidenced by its 68.20% price target upside and “Strong Buy” analyst rating—suggests the market is underestimating its resilience [3]. For context, the Shanghai Stock Exchange’s average P/E of 14.340 in March 2025 [1] indicates that QFIN’s valuation is an outlier even within China’s broader equity market.

Risks and the Road Ahead

No investment thesis is without caveats. QFIN faces regulatory risks, as Chinese authorities continue to tighten oversight of fintech platforms. Additionally, delinquency rates, though currently manageable, could rise if economic conditions deteriorate. However, the company’s AI-driven risk models and diversified institutional partnerships—now spanning 165 financial institutions—position it to navigate these challenges better than peers [1].

Conclusion: A Mispriced Opportunity

QFIN’s Q2 2025 results, AI-led innovation, and undervalued stock make it a standout in China’s credit-tech sector. With a business model that balances growth and prudence, and a valuation that appears to discount its long-term potential, QFIN offers a rare combination of near-term stability and upside. For investors willing to look beyond short-term volatility, this fintech leader represents a high-conviction bet on the future of credit.

**Source:[1] Qfin Holdings Announces Second Quarter and Interim 2025 [https://ir.qifu.tech/news-releases/news-release-details/qfin-holdings-announces-second-quarter-and-interim-2025][2] Qifu Technology, Inc. (NASDAQ: QFIN; HKEx: 3660) Q1 2025 Financial Overview [https://site.financialmodelingprep.com/market-news/qifu-technology-qfin-q1-2025-financial-results-overview][3] Qifu Technology (QFIN) AI Stock Analysis [https://www.tipranks.com/stocks/qfin/stock-analysis]