Qifu Technology: A Bullish Bet on China's Credit-Tech Revolution

In the fast-paced world of fintech, Qifu Technology has emerged as a standout player, and its recent financial results are a testament to its growing dominance in China's credit-tech sector. The company's unaudited financial results for the fourth quarter and full year ended December 31, 2024, reveal a story of robust growth and strategic foresight. Let's dive into the numbers and the implications for investors.



A Quarter of Record-Breaking Growth

Qifu Technology reported total net revenue of RMB4,482.3 million (US$614.1 million) for the fourth quarter of 2024, a slight increase from RMB4,370.2 million in the prior quarter. This steady growth in revenue is a clear indicator of the company's expanding market reach and increasing user base. As of December 31, 2024, the platform had connected 162 financial institutional partners and 261.2 million consumers with potential credit needs, an 11.0% increase from the previous year. This growth in user base and partnerships is a key driver of the company's revenue and net income growth.

The company's net income for the fourth quarter of 2024 was RMB1,912.7 million (US$262.0 million), demonstrating robust profitability. This is a significant figure, especially when compared to industry benchmarks and competitors. Qifu Technology's financial performance is further supported by its strong loan facilitation volume. In the fourth quarter of 2024, financial institutional partners originated 24,814,923 loans through the platform, with RMB47,796 million of such loan volume facilitated under the capital-light model and ICE, representing 53.2% of the total. This indicates a steady growth in loan facilitation, which is a key revenue driver for Credit-Tech platforms.

Strategic Moves: Dividends and Share Repurchases

One of the most notable aspects of Qifu Technology's recent announcements is its decision to raise its semi-annual dividend. This move sends a strong signal to investors about the company's financial health and confidence in its future prospects. By increasing the dividend, Qifu Technology is demonstrating its commitment to returning value to shareholders. This can attract more investors, particularly those who are income-focused, and potentially increase the demand for the company's shares.

The company's decision to raise the dividend is also accompanied by a new US$350 million share repurchase plan. Share repurchases reduce the number of outstanding shares, which can increase earnings per share (EPS) and potentially drive up the stock price. Additionally, a higher dividend yield can make the stock more attractive to investors, further supporting the stock price. This combination of dividend increases and share repurchases can create a virtuous cycle where a higher stock price leads to increased investor confidence, which in turn can attract more investors and further support the stock price.

Risk Mitigation and Long-Term Growth

Qifu Technology's focus on capital-light models and technology solutions, such as the Intelligence Credit Engine (ICE), significantly impacts its risk profile and long-term growth prospects. The capital-light model reduces the company's risk exposure by not bearing principal risk. For loans facilitated through ICE, the company does not assume the financial risk associated with the loans, thereby mitigating potential losses from defaults or delinquencies. This is evident in the data showing that RMB68,239 million was under the capital-light model, ICE, and other technology solutions, representing 57.3% of the total in the fourth quarter of 2023. This proportion increased to 53.2% in the fourth quarter of 2024, indicating a continued reliance on this risk-mitigating model.

The use of technology solutions like ICE enhances the company's long-term growth prospects by improving efficiency and scalability. The Intelligence Credit Engine leverages big data and cloud computing technology to match borrowers and financial institutions, providing a pre-loan investigation report of borrowers. This technological advantage allows Qifu Technology to process a large volume of loans efficiently. For example, in the fourth quarter of 2024, financial institutional partners originated 24,814,923 loans through the platform, with RMB47,796 million of such loan volume facilitated under the capital-light model and ICE, representing 53.2% of the total. This demonstrates the scalability and efficiency of the technology solutions in handling a significant portion of the loan facilitation volume.

Moreover, the company's focus on technology solutions positions it well for future growth. The shift towards end-to-end technology solutions, including on-premise deployment, SaaS, or hybrid models, allows Qifu Technology to offer comprehensive services to financial institutions. This is supported by the data showing that RMB79,599 million of such loan balance was under the capital-light model, ICE, and total technology solutions, an increase of 8.6% from RMB73,268 million as of December 31, 2023. This growth in the loan balance under technology solutions indicates the increasing reliance and trust of financial institutions on Qifu Technology's technological capabilities.

Conclusion

Qifu Technology's recent financial performance, strategic initiatives, and focus on technology solutions position it as a strong player in the credit-tech sector. The company's decision to raise its semi-annual dividend and implement a share repurchase plan sends a clear signal to investors about its financial health and confidence in its future prospects. Additionally, the company's focus on capital-light models and technology solutions reduces its risk exposure and enhances its long-term growth prospects. As Qifu Technology continues to innovate and expand its market reach, it is well-positioned to capitalize on the growing demand for credit-tech services in China and beyond.