SHANGHAI - Qifu Technology, Inc. (NASDAQ: QFIN; HKEx: 3660), a prominent Credit-Tech platform in China, has publicly contested accusations made by Grizzly Research, a short seller, regarding its financial practices and business operations. In a statement released today, Qifu Technology refutes the claims in the report issued on Monday, calling them inaccurate and misleading.
The company clarified that its financial data reported to the State Administration for Market Regulation (SAMR) for 2022 and 2023, under People's Republic of China GAAP, showed 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. These figures differ from those reported to the U.S. Securities and Exchange Commission (SEC) due to GAAP discrepancies and the fact that the SAMR filings do not encompass all of the company's subsidiaries and consolidated affiliated entities in China.
Qifu Technology emphasized its strong operating cash flow and its commitment to shareholder returns, having repurchased over US$300 million of its American Depositary Shares (ADSs) and distributed approximately US$180 million in cash dividends in 2024.
The company also addressed specific allegations in the report concerning its regional headquarters in Shanghai, its relationship with Shanghai Qibutianxia Information Technology Co., Ltd., and claims of financial manipulation. Qifu Technology stated that its co-investment with the 360 Group and subsequent acquisition of equity interest in the joint venture were negotiated at arm's length and approved by its board and audit committee. Furthermore, the company denied the acquisition of land in the Huangpu District of Shanghai and the manipulation of financial statements through Shanghai Qibutianxia.
Regarding the report's claims about delinquency rates and provisions, Qifu Technology argued that the report misunderstood its financial practices and relevant accounting standards. The company maintains distinct categories for provisions and adheres to U.S. GAAP standards, as demonstrated by its historical data. It also highlighted the use of leading risk indicators, such as the Day-1 delinquency rate and 30-day collection rate, to proactively assess credit risk.
The company's cash and cash equivalents decreased primarily due to the growth in on-balance sheet loans, cash dividends, and stock repurchase program, contrary to the report's suggestion of fabricated profits to account for missing cash. Qifu Technology also refuted the overleveraging claim, explaining that its leverage ratio pertains only to risk-bearing assets and stood at 2.4 as of June 30, 2024, a historical low.
Lastly, Qifu Technology defended its loan interest rates, asserting compliance with regulatory requirements and dismissing the report's claim that it exceeds legal limits.
The board of directors, including the audit committee, is reviewing the allegations and considering actions to protect shareholder interests. Qifu Technology will continue to make disclosures in accordance with applicable regulations.
This article is based on a press release statement from Qifu Technology, Inc.
In other recent news, Qifu Technology has been the subject of several noteworthy developments. The company 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. Non-GAAP net income also saw a significant rise of 23% to RMB1.41 billion.
In response to these developments, BofA Securities updated 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, which increased from approximately 3.5% in the first quarter to roughly 4.4% in the second quarter.
The improved performance is attributed to operational adjustments and strategic investments in technology, such as AI and large language models. However, 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.
Investors will continue to monitor Qifu Technology's performance in the upcoming quarters, as BofA Securities has revised its earnings per share forecasts for the company, reflecting their analysis of Qifu's financial performance and the expected trajectory of its earnings in the coming years.
InvestingPro Insights
Qifu Technology's robust defense against short seller accusations is further supported by several key financial metrics and insights from InvestingPro. The company's strong financial position is reflected in its market capitalization of $4.42 billion and a notably low P/E ratio of 6.49, suggesting the stock may be undervalued relative to its earnings.
An InvestingPro Tip highlights that QFIN is "Trading at a low P/E ratio relative to near-term earnings growth," which aligns with the company's assertion of strong financial performance. This is further corroborated by the PEG ratio of 0.25, indicating that the stock's price may not fully reflect its growth potential.
The company's commitment to shareholder returns, as mentioned in the article, is reinforced by InvestingPro Data showing a dividend yield of 4.23% and an impressive dividend growth of 42.17% over the last twelve months. This supports Qifu Technology's statement about distributing significant cash dividends.
Another InvestingPro Tip notes that "Management has been aggressively buying back shares," which corresponds with the company's disclosure of repurchasing over $300 million of its ADSs. This action typically signals management's confidence in the company's value and future prospects.
The article's mention of Qifu Technology's strong operating cash flow is complemented by the InvestingPro Tip indicating that "Liquid assets exceed short term obligations," suggesting a healthy financial position.
It's worth noting that InvestingPro offers 13 additional tips for QFIN, providing investors with a more comprehensive analysis of the company's financial health and market position.
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