360 DigiTech: A Maturing Chinese Fintech with Flexibility and Promise

  • The company has demonstrated unique technological capabilities and is poised for further development
  • It will benefit from the antitrust regulations that provide extensive market opportunities for niche fintech champions
  • It is expected to keep expanding its business scale, while also improving asset quality

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Even though 360 DigiTech's share price has recently been growing, it still seems undervalued.


At the very end of 2020, the US IPO of lending platform Upstart (UPST:NASDAQ) grabbed all the spare market attention as its share price doubled on the first trading day. It has surged 7 times to USD 166.8, as of May 27, 2021, from its issue price of USD 20. It spurred investors' interest in the fintech industry, with many concept stocks jumping up. Following this trend, the price of 360 DigiTech (QFIN:NASDAQ), a leading Chinese fintech platform, ran up by 128.5% from USD 12.97 at the very beginning of 2021, to the closing price of USD 28.73 on May 26 of the same year.

However, some of China's fintech companies are still not fairly evaluated, with their P/E ratios significantly lower than those of their US counterparts. Taking an example, Upstart, which is recognized as the future of US financial shares, has a P/E ratio near 900x, which represents an obviously overpriced position. Very similar to Upstart, 360 DigiTech also runs a technology-based loan facilitation business. And it is extremely undervalued, with a P/E ratio of 8x.

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Beyond the stock performance, 360 DigiTech will continue its robust business growth, benefiting from its solid fundamentals. Transiting from a loan issuer, 360 DigiTech is now a to-B service provider with advanced technology capabilities. Here, we list some of its main growth catalysts. 

Catalyst 1 – space released by giants

In recent years, the state in China has increased its supervision of fintech, especially the online lending market, with multiple new strict regulations launched. Fortunately for 360 DigiTech, it does not seem to be a primary target of the regulators as it only provides loan facilitation services with less than 1% of the capital involved.

 For example, in late December 2020, the Supreme Court's ruling essentially exempted institution lending from the 4x private lending rate cap, which lifted a major obstacle in the industry and limited the profitability of online credit platforms that directly participate in the issuance process. Ant Group and JD Digits are two companies impacted by this regulation. Also, the state urges small loan providers to increase their capital proportion to at least 30%, marking a much lower lending scale for these platforms. The clients unqualified for this criteria will no longer be able to receive services from these online lending platforms and will shift to seek possibilities from smaller companies or third-party loan facilitators, like 360 DigiTech. 

In the future, the large market space released by Ant and Tencent's WeChat is likely to benefit the company.

Catalyst 2 – outstanding risk control

During 2020, most loan providers suffered high loss rates. However, 360 DigiTech, controlled the risks well under the downturn...

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