On Wednesday, Citi analyst updated the financial outlook for Qifu Technology (NASDAQ: QFIN), increasing the price target to $37.50 from the previous $31.44, while reiterating a Buy rating on the stock. This adjustment follows Qifu Technology's third-quarter financial performance, which surpassed expectations.
Qifu Technology reported a third-quarter non-GAAP net profit after tax (NPAT) of RMB 1.83 billion, marking a 29% increase from the previous quarter and a 54% rise year-over-year. These figures notably exceeded the management's guidance, which had forecast a non-GAAP NPAT ranging between RMB 1.55 billion and RMB 1.65 billion. The better-than-expected results were attributed to a significant provision writeback and improvements in funding costs during the third quarter of 2024.
Management at Qifu Technology anticipates that the company's strong performance will continue into the fourth quarter of 2024, projecting a non-GAAP NPAT of RMB 1.80 billion to RMB 1.90 billion. This represents a year-over-year increase of 57% to 65%, driven by sustained loan volume and a resilient net take rate.
As of November 19, 2024, Qifu Technology has executed approximately $298 million of its $350 million share buyback program announced in March 2024, with an average buyback price of $21.7 per American Depositary Share (ADS). The company is on track with its share reduction goals, aiming to lower its share count by approximately 3% in 2023 and 10% in 2024, aligning with management's guidance to reduce the share count by 30% by 2026.
Looking ahead, the company has revealed plans for a new and larger share buyback program for 2025, with a budget of $450 million. This initiative is part of Qifu Technology's strategy to enhance shareholder returns, aiming to distribute approximately 80% of its 2025 GAAP NPAT in payouts, compared to 54% and 70% in 2023 and 2024, respectively.
In other recent news, Qifu Technology reported robust earnings and revenue results for 2022 and 2023, showing revenues of RMB 17.0 billion and RMB 16.0 billion, with net profits of RMB 5.2 billion and RMB 4.7 billion, respectively. The company also repurchased over US$300 million of its American Depositary Shares and distributed approximately US$180 million in cash dividends in 2024. Qifu Technology is currently disputing allegations made by Grizzly Research about its financial practices, calling the accusations inaccurate and misleading.
The company further highlighted its strong operating cash flow and commitment to shareholder returns. In another recent development, Qifu Technology reported its highest quarterly profit in nearly three years during the second quarter of 2024, with a 6.3% year-over-year revenue increase to RMB4.16 billion and a significant rise of 23% in Non-GAAP net income to RMB1.41 billion.
In response to these developments, BofA Securities upgraded its outlook on Qifu Technology shares, raising the price target to $28.40 from the previous $25.00. This adjustment was influenced by a notable rise in Qifu's net take rate of its loan portfolio. Despite the positive developments, Qifu's management has indicated that the current net take rate may not be sustainable, considering 4.0-4.5% as a more realistic range for the future.
BofA Securities has revised its earnings per share forecasts for Qifu Technology, reflecting their analysis of the company's financial performance and the expected trajectory of its earnings in the coming years.
InvestingPro Insights
Qifu Technology's strong financial performance and optimistic outlook are further supported by real-time data from InvestingPro. The company's P/E ratio of 8.1 and PEG ratio of 0.29 suggest that the stock may be undervalued relative to its earnings growth potential, aligning with Citi's bullish stance and increased price target.
InvestingPro Tips highlight that QFIN is "Trading at a low P/E ratio relative to near-term earnings growth" and is a "Prominent player in the Consumer Finance industry." These insights reinforce the company's strong market position and potential for continued growth, as reflected in the management's positive guidance for Q4 2024.
The company's aggressive share buyback program, as mentioned in the article, is corroborated by an InvestingPro Tip stating that "Management has been aggressively buying back shares." This strategy, combined with QFIN's impressive YTD Price Total (EPA:TTEF) Return of 115.04% and 1 Year Price Total Return of 100.59%, demonstrates the company's commitment to creating shareholder value.
For investors seeking a deeper understanding of Qifu Technology's financial health and growth prospects, InvestingPro offers 11 additional tips, providing a comprehensive analysis to inform investment decisions.
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