FinVolution Group

FINV Details

FinVolution Group (NYSE: FINV) is a prominent fintech platform in China connecting underserved individual borrowers with banks. FINV is a pioneer in China's online consumer finance market, with unique technology and extensive experience in credit risk assessment, fraud detection, big data, and artificial intelligence. As of September 30, 2021, the company had over 135.6 million registered users.

Latest News:

• Share Repurchase Program: On November 17, 2021, FINV approved an extension of its existing USD 60 million share repurchase program for another twelve months, commencing January 1, 2022, and ending December 31, 2022. Through December 31, 2022, the firm is entitled to repurchase its Class A ordinary shares in ADSs with an aggregate value of up to USD 39.7 million.

Q3FY21 Results:

• Improvement in Revenues: The company witnessed an increase of 40.81% in net revenues to RMB 2.53 billion in Q3FY21 (ended September 30, 2021) compared to RMB 1.79 billion in Q3FY20, due to the increase in loan facilitation service fees and post facilitation service fees.
• Improvement in Net Income: FINV's net profit increased to RMB 632.45 million in Q3FY21, up from RMB 596.95 million in Q3FY20.
• Growth in New Borrowers: In Q3FY21, the total number of new borrowers was 1.18 million, up 190.2% from 0.41 million in Q3FY20.
• Boost in Transaction Volume: FINV witnessed the increase in total transaction volume to RMB 38.1 billion in Q3FY21 from RMB 17.3 billion in Q3FY20

Key Risks:

• Voting Concentration Risk: The Class B common stock of FINV has twenty votes per share, opposed to one vote per share for the Class A common stock. As a result, as of March 31, 2021, Class B common stockholders, including the electing directors, held about 93.3% of the voting power. This concentration of voting power hampers other shareholders' ability to influence corporate affairs.
• Political & Regulatory Risk: The Chinese authorities' crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent the company's operations. After the passage of a bill in the US, this could lead to the delisting of some Chinese companies from the country's exchanges (if the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Outlook:

• FY21 Estimates: As of November 18, 2021, FINV expect full year FY21 transaction volume to reach between RMB 130 -135 billion representing a YoY growth in the range of 102.8-110.6%.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

FINV Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

FINV's share price has fallen 40.61% in the past six months and is currently leaning towards the lower-band of the 52-week range of USD 2.63 to USD 10.61. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 37.12. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 5.86.

Considering the significant correction in the stock price, strategic agreements, upsurge in transaction volumes, China's crackdown, steady dividends, and other associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 4.71, down 1.05% as of January 07, 2022, at 1:02 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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