瑞信中国网络借贷行业零售融资模式的转型201910965页

ChinaOnlineLendingSectorTransformationfromaretail-fundedmodelDiversifiedFinancials|InitiationFigure1:Coveredonlinelenders:%institutionalfundingvsYTDsharepricereturnNote:9Frepresentspost-IPOsharepricereturn.Closingpricesasof8Oct,2019.Source:Companydata■BracingforanintensifyingP2Pclean-up.WeseetwofundamentalconflictsatthecoreoftheP2Pmodel:(1)riskappetitemismatchbetweeninvestorsandborrowers,and(2)highregulatorycostvssmallsystemicimpact.WeexpectacceleratedP2Pplatformclean-upheadinginto4Q,withcontinuedroll-outofhighregulatoryhurdleswhilethe‘triple-reductions’(i.e.,reductioninthenumberofplatforms,outstandingbalance,andnumberofinvestors)remaininforceforanextendedperiodoftime—likelythrough1H2020.Amajority(~98%)ofthecurrently708operatingplatformsislikelyshutdownduringthisprocess.■Pickingthebest-positionedplayersintransformingtowardsinstitutionalfunding.Withlimitedlicensingoptionsavailablefornow,loanfacilitation(or‘assistedlending’)modelisthemostviableexitstrategyforexistingP2Ps.Despiteagenerallynegativeimpactontakerate(higherfundingcostandpotentiallylowerAPR)andoperatingmargin(highersales&marketingexpense),afasterprogressintransformationtowardstheloanfacilitationmodelwillbeakeydifferentiationinloanoriginationvolumegrowth.Inthisreport,weidentifythreeareasoftheonlinelendingbusinessmostvaluedbythelicensedfinancialinstitutions:(1)customers,(2)assetquality,and(3)regulatorycompliance.LexinandQudianrankamongthebest-positionedfortransformingtowardsa2Bmodel.YirenDigitalrankslast.WeadjusttheWACCtoreflecthigherexposuretoP2P-relatedregulatoryuncertainty.■StockCalls—preferLexinandQudian.WeinitiatecoverageonLexinwithOUTPERFORM(TPofUS$17.00)and9FwithNEUTRAL(TPatUS$11.62).MaintainOUTPERFORMonQudian(TPUS$11.70)andVCredit(TPHK$13.00).WeassumecoverageonPPDaiwithOUTPERFORM(TPcuttoUS$5.80fromUS$8.80).WealsoassumecoverageonYirenDigitalwithNEUTRAL(TPcuttoUS$6.92fromUS$20).Weprefer(1)Lexinforlong-termsustainability,thankstoafocusedanddifferentiatedcustomerbaseandeffectiveriskcontrol,and(2)Qudianforrelativedefensivenessofitsevolvingbusinessmodelamidtheregulatoryuncertainty.■Onekeyriskisthesustainabilityofinstitutionalpartnership.Webelievetheon-boardingcycleof3-6monthsreducesbanks’willingnesstoabruptlyterminate.Onlinelenderswithstrongerriskcontrolshouldenjoybetterfundingsustainabilitythanpeers.QudianLexinPPDaiYRDVCredit9F10%30%50%70%90%110%-40%-20%0%20%40%60%%ofloanvolumefundedbyinstitutionsYTDsharepricechange9October2019EquityResearchAsiaPacific|ChinaDISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinv[e-mail],[e-mail]@[e-mail]9October2019ChinaOnlineLendingSector2FocuschartsFigure2:Fintechplayersundercoverage—valuations,targetprice,andratingrecommendationsFigure3:Rising%ofinstitutionalfundinghasbeentheprimarydriveroftotalvolumegrowthduring‘triple-reductions’Source:Companydata,CreditSuisseestimatesSource:Companydata,CreditSuisseestimatesFigure4:CSforecast—%institutionalfundingvstakerateNote:Combinednettake-ratereflectson-andoff-B/Snetrevenuedividedbytotalloanoriginationvolume.Source:Companydata,CreditSuisseestimatesFigure5:QudianandLexin2Q19activeborrowergrowthwasmarkedlystrongerthanpeersFigure6:LexinandQudianS&MexpensepernewcustomerdeclinedYTD,buckingindustrytrendSource:Companydata,CreditSuisseestimatesSource:Companydata,CreditSuisseestimatesTickerNameCurrencyCurrentP/ECurrentP/BRatingNewFY19EFY19ELX.OQLexin17.00USD4.71.6OutperformQD.NQudian11.70USD3.31.0Outperform2003.HKVCredit13.00HKD5.51.1OutperformPPDF.NPPDai5.80USD2.50.8OutperformJFU.OQ9F11.62USD8.21.7NeutralYRD.NYirenDigital6.92USD3.81.3NeutralTP1711201019101120142610221010-18%-9%0%9%18%27%36%051015202530QudianVCredit*Lexin9FPPDaiXFinancialYirenDigital(Rmbbn)1Q192Q19QoQ%(RHS)0%5%10%15%20%25%0%10%20%30%40%50%60%70%80%90%100%2018A2019E2020E2018A2019E2020E2018A2019E2020E2018A2019E2020E2018A2019E2020E2018A2019E2020E%fundedbyinstitutionsvialoanfacilitation(LHS)Combinednettake-rate(RHS)QudianVCreditLexin9FPPDaiYirenDigital-40%-20%0%20%40%60%0.01.63.24.86.48.0PPDai9FQudianLexinXFinancialYirenDigital#ofactiveborrowers(mn)YoY%(RHS)01002003004001Q182Q183Q184Q181Q192Q19RmbLexinPPDaiQudianQfin9F9October2019ChinaOnlineLendingSector3Transformationfromaretail-fundedmodelP2Pclean-upissettoacceleratein4QWeexpectacceleratedP2Pclean-upheadinginto4Q,withcontinuedroll-outofhighregulatoryhurdleswhilethe‘triple-reductions’remainsinforceforanextendedperiodoftime—likelythrough1H2020.Inthemeantime,amajority(~98%)ofthecurrently708operatingplatformswilll