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    X Financial (XYF)

    Q3 2024 Earnings Summary

    Reported on Feb 21, 2025 (Before Market Open)
    Pre-Earnings Price$6.95Last close (Nov 26, 2024)
    Post-Earnings Price$6.95Open (Nov 27, 2024)
    Price Change
    $0.00(0.00%)
    • Significant share repurchase programs with approximately $50 million remaining indicate management's confidence in the company's undervaluation and commitment to enhancing shareholder value. Management is willing to initiate new repurchase plans if necessary.
    • Stable regulatory environment and favorable economic policies in China are expected to benefit the company. Management does not anticipate significant regulatory changes and expects loan volumes to continue growing due to government efforts to stimulate the economy.
    • The company is trading at a low valuation of just over 1x earnings, significantly lower than peers trading at 3-5x earnings, presenting a potential investment opportunity. Management is focused on returning capital to shareholders through dividends and share repurchases to enhance shareholder value.
    • The company's share repurchase programs have been ineffective due to low trading volume, managing to repurchase only approximately 2 million ADS, despite having $50 million remaining in authorization, indicating challenges in returning capital to shareholders.
    • The dividend payout ratio is low compared to peers, with the company paying out about 6.5% of earnings per share as dividends, whereas peers pay in the low 20% range, potentially making the stock less attractive to income investors.
    • Low trading volume and technical currency exchange issues are hindering the company's ability to execute share repurchase plans effectively, which could limit its efforts to enhance shareholder value.
    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Total Loan Amount Facilitated and Originated for Q4 2024

    Q4 2024

    no prior guidance

    between RMB 30 billion and RMB 31 billion

    no prior guidance

    Monthly Loan Volume for Q4 2024

    Q4 2024

    no prior guidance

    expected to exceed RMB 10 billion

    no prior guidance

    Total Loan Amount Facilitated and Originated for Full Year 2024 (FY 2024)

    FY 2024

    no prior guidance

    between RMB 102.6 billion and RMB 103.6 billion

    no prior guidance

    TopicPrevious MentionsCurrent PeriodTrend

    Capital Return Strategies

    Q4 2023: Discussed a repurchase plan with modest buybacks and a semiannual dividend policy. Q2 2024: Announced a $20 million repurchase program along with a semiannual dividend of USD 0.17 per ADS. Q1 2024: Introduced a new $20 million repurchase program with no dividend mention.

    Q3 2024: Detailed two active share repurchase programs (a $30M and a $20M program) and reiterated a semiannual dividend policy with an attractive ~6% yield in the context of a notably low stock valuation.

    Consistent focus with enhanced detail and reaffirmed commitment to returning capital; greater emphasis on leveraging low valuation to drive buybacks.

    Loan Origination and Asset Quality

    Q4 2023: Reported on loan originations with notable increases but also higher delinquency rates and provisions. Q1 2024: Highlighted declines in loan volume with rising delinquency and increased provisions amid strict risk controls. Q2 2024: Mixed guidance with lower YoY loan volume yet increased provisions, signaling cautious management.

    Q3 2024: Reported sequential growth in loan volume (RMB 28 billion) along with improved delinquency rates (down from previous higher percentages) while exceeding guidance, indicating successful risk management adjustments.

    Improved asset quality with better risk metrics; sentiment shifts to a more positive view as operational performance aligns with growth expectations.

    Regulatory Environment Dynamics

    Q4 2023: Mentioned stability in China’s regulatory environment amid transformation and structural adjustments, though challenges remained. Q1 and Q2 2024: No specific mention.

    Q3 2024: Described as fairly stable with the added optimism driven by government efforts to stimulate the economy, suggesting a more positive outlook for industry volume growth.

    Persistent stability with a shift to a more optimistic sentiment, helping to ease uncertainty over future economic stimulus measures.

    Trading Volume and Liquidity Challenges

    Q4 2023: Noted consistently thin trading volume and liquidity constraints that limited repurchases due to a restriction of 25% of the float. Q1 and Q2 2024: No discussion on this topic.

    Q3 2024: Reiterated challenges due to low trading volume which hindered share buybacks, though management expressed hope for increased volume in the coming months.

    Ongoing challenge; the issue remains consistent with previous periods while management’s focus on improvements suggests potential for future alleviation.

    Valuation Metrics and Investment Attractiveness

    Q4 2023: Highlighted the low P/E multiple (approximately 1–1.5x), which frustrated investors despite stable earnings; dividends were used as a tool to attract investors. Q1 and Q2 2024: This topic was not specifically addressed.

    Q3 2024: Emphasized trading at roughly 1x earnings and at about 1/3 of tangible book value; this low valuation is driving both share repurchase strategies and dividend policies aimed at boosting investment appeal.

    Remains a key concern that influences other strategies; the focus continues on capital return measures as a response to undervaluation, reinforcing its strategic importance.

    Financial Performance Growth (Net Income & Revenue)

    Q4 2023: Demonstrated strong annual growth in net revenue (35% YoY) and net income (46% YoY) despite a Q4 decline due to asset quality risks. Q1 2024: Reported robust increases in both net revenue and net income (20% and 28% YoY, respectively). Q2 2024: Noted record high performance with significant sequential and YoY gains.

    Q3 2024: Delivered positive sequential and YoY improvements in net revenue (13% YoY, 15% sequential) and net income, with non-GAAP adjusted net income reaching a record high, reflecting robust operational growth.

    Steady and consistent positive growth; financial performance reinforces the company’s strategic outlook and supports broader shareholder return initiatives.

    Emerging Customer Acquisition Channels and Risk Management Adjustments

    Q4 2023: Had only minimal mention regarding risk management adjustments while focusing on overall asset quality. Q2 2024: Introduced new customer acquisition channels and highlighted machine learning–based risk management improvements, including adjustments in average loan sizes. Q1 2024: Not mentioned.

    Q3 2024: Intensified efforts in borrower acquisition coupled with timely risk management adjustments that resulted in reduced delinquency rates, building on the advancements introduced in Q2 2024.

    Growing focus on leveraging advanced risk management and new acquisition channels; ongoing initiatives are reinforcing improved asset quality and customer growth strategies.

    Technical Currency Exchange Challenges

    Not mentioned in Q4 2023, Q1 2024, or Q2 2024.

    Q3 2024: Newly raised issue where technical currency exchange challenges impacted the execution of share repurchases, though management was determined to overcome these obstacles.

    New operational concern with potential implications for capital return strategies; management’s proactive acknowledgment could shape future execution capabilities.

    1. Capital Return Strategy
      Q: Can you update us on your capital return program?
      A: The company has a $50 million share repurchase program with about $50 million remaining ( ). They are working with one or two big investors, and if the current program is insufficient, they will initiate a new repurchase plan ( ). They prefer share repurchases over dividends due to the current share price but will continue semi-annual dividend payouts at an attractive yield of around 6% ( , ).

    2. Dividend Increase Consideration
      Q: Will you consider increasing the dividend payout?
      A: Management acknowledges that peers pay dividends in the low 20% of income, while the company pays out about 6.5% ( ). They are committed to returning capital through dividends and share buybacks but prefer buybacks due to the current low stock price ( ). They will maintain the dividend yield at approximately 6%, adjusting as the stock price changes, and continue to pursue all available share buybacks ( , ).

    3. Low Valuation and Trading Volume
      Q: How will you address low trading volume and valuation?
      A: The major challenge is low trading volume, which limits buyback activities ( ). They hope increased volume will allow more buybacks during open periods ( ). Management is maximizing efforts in dividend yield and share buybacks to address the low valuation and advises patience, noting the stock price has risen from around $2 to almost $7 since they joined ( ).

    4. Regulatory Environment
      Q: Can you update us on the regulatory landscape?
      A: The regulatory environment is currently stable, with no significant new regulations expected in the industry ( ). The Chinese government's efforts to stimulate the economy should benefit their industry, and they expect their volume to continue to grow as a result ( ).