Qifu: Navigating Micro Loan Yield Caps with Funding Advantages and Consolidation Upside Supports Buy Rating

Morgan Stanley analyst Richard Xu maintained a Buy rating on Qifu Technology yesterday and set a price target of $50.00.

Richard Xu has given his Buy rating due to a combination of factors that balance regulatory headwinds with attractive valuation and competitive strengths. While the anticipated cap on micro loan yields to 12% is expected to compress Qifu’s take rate—particularly as higher-yielding on-balance-sheet loans migrate to guaranteed facilitation—he believes the resulting earnings impact is manageable relative to the current share price. His estimates suggest that although the blended net take rate could decline, Qifu can still generate reasonable profitability thanks to its funding advantages and ability to reconfigure its product mix.

At the same time, Xu expects industry consolidation to work in Qifu’s favor, as many of the over 4,800 micro loan firms in China may struggle under the tighter yield cap while Qifu can leverage low-cost ABS/ABN funding at around 2-3%. This cost advantage should enable Qifu to continue offering competitively priced loans and capture market share from weaker players, even with yields below 12%. Coupled with what he views as a substantial upside to his price target from the current stock level, he concludes that the risk-reward profile remains compelling, supporting his Buy recommendation despite near-term regulatory uncertainty.

Xu covers the Financial sector, focusing on stocks such as Ping An Insurance Company of China, AIA Group, and Qifu Technology. According to TipRanks, Xu has an average return of 4.4% and a 55.56% success rate on recommended stocks.