QFIN: APR Cap Adjustments Will Shape Earnings Resilience Despite Competitive Pressures

Analysts have trimmed their price target on Qfin Holdings, cutting fair value from approximately $35.55 to $32.90 as they factor in slower loan growth, a modestly higher discount rate, and reduced revenue growth expectations following recent indications of increased competition and regulatory constraints on high APR lending.

Analyst Commentary

Analyst commentary around Qfin Holdings has turned more cautious following the latest quarterly results and regulatory developments affecting higher APR lending.

JPMorgan, a major broker, has notably shifted to a Neutral stance with a sharply lower price target, reinforcing broader Street concerns about the durability of Qfin's prior growth and earnings profile.

Bullish Takeaways

Bullish analysts highlight that the reset in expectations and lower price targets may already discount a more conservative growth and margin trajectory, potentially limiting further downside if execution stabilizes.
The strategic reduction of loans with APRs above 24 percent is viewed as a necessary adjustment to align with regulatory direction, which could reduce headline risk and support a more sustainable business mix over time.
Some see the pivot toward higher quality borrowers, even at lower APRs, as a way to strengthen portfolio credit performance, which could underpin more predictable earnings and support valuation multiples once growth normalizes.

Bearish Takeaways

Bearish analysts emphasize that scaling back high APR products directly pressures revenue growth and net interest margins, which in turn justifies lower valuation multiples and reduced price targets across the Street.
The increased competition for higher quality clients is seen as a structural headwind that may limit Qfin's ability to offset APR compression with higher volumes, raising concerns about the company’s long term growth algorithm.
The significant earnings downside in the latest quarter is interpreted as evidence that the business model is more sensitive to regulatory and competitive shifts than previously assumed, increasing execution risk.
With a major house such as JPMorgan cutting its rating and target, some investors worry that further estimate revisions from other firms could follow, extending the period of multiple compression and sentiment overhang.

What's in the News

Issued new earnings guidance for the fourth quarter of 2025, forecasting net income between RMB 0.92 billion and RMB 1.12 billion, indicating expectations for continued profitability despite regulatory and competitive pressures (Corporate Guidance)
Provided full year 2025 net income guidance in the range of RMB 5.88 billion to RMB 6.08 billion, giving investors clearer visibility into medium term earnings expectations (Corporate Guidance)
Scheduled a board meeting on November 18, 2025, to approve unaudited financial results and the announcement for the third quarter ended September 30, 2025, which may influence market views on earnings momentum (Board Meeting)

Valuation Changes

Fair Value: Reduced from $35.55 to $32.90, falling modestly as updated assumptions reflect slower growth and a slightly higher risk profile.
Discount Rate: Increased slightly from 9.35 percent to about 9.45 percent, implying a marginally higher required return and lower present value of future cash flows.
Revenue Growth: Lowered meaningfully from roughly 2.96 percent to about 2.29 percent, signaling a more cautious outlook on top line expansion.
Net Profit Margin: Edged up marginally from about 33.95 percent to roughly 33.97 percent, indicating a largely stable profitability expectation despite slower growth.
Future P/E: Compressed from about 4.80x to roughly 4.44x, reflecting a modest de rating in line with revised growth and risk assumptions.

Advanced AI integration and new technology solutions are boosting operational efficiency, improving risk management, and diversifying high-margin revenue streams.
Favorable regulatory shifts and strong digital expansion position Qfin for sustained market share gains, revenue growth, and profitable international scaling.
Regulatory pressures, soft consumer demand, asset quality deterioration, and a riskier capital-heavy model threaten revenue growth, margin stability, and the effectiveness of international expansion.

Catalysts

About Qfin Holdings

Qfin Holdings, Inc., together with its subsidiaries, operate AI- driven credit-tech platform under the Qifu Jietiao brand in the People’s Republic of China.What are the underlying business or industry changes driving this perspective?

Qfin's ongoing integration of advanced AI and large language models into its risk assessment and user profiling systems is already reducing default rates (e.g., FPD 7-day down 5%, improved model KS scores) and improving operational efficiency, which should protect and gradually enhance net margins in the medium and long term.
Regulatory tightening and industry consolidation in China are expected to favor well-capitalized, technologically-advanced platforms like Qfin by reducing irrational competition, lowering marketing and risk costs, and supporting higher user retention, ultimately increasing market share and sustaining revenue growth over time.
Rapid expansion of embedded finance and new digital partnership channels (including nearly full coverage of leading internet platforms), coupled with strong growth in new credit line users (up 40% YoY, with embedded finance channel users up 103%), positions Qfin to benefit from continued digitalization and growing demand for online credit, supporting robust loan origination volumes and top-line growth.
Expansion of B2B SaaS-like technology solutions-such as the launch of next-gen AI credit agent products for banks (already attracting commercial orders)-is expected to create new high-margin recurring revenue streams, lifting overall operating margins and providing earnings diversification.
Overseas expansion, beginning with the U.K. market and further international opportunities, leverages Qfin's proprietary fintech infrastructure and data analytics to address underserved borrower segments globally, expanding the company's addressable market and providing an additional vector for long-term revenue and profit growth.

Qfin Holdings Earnings and Revenue Growth

Qfin Holdings Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Qfin Holdings's revenue will grow by 7.0% annually over the next 3 years.
Analysts assume that profit margins will shrink from 38.7% today to 36.6% in 3 years time.
Analysts expect earnings to reach CN¥8.4 billion (and earnings per share of CN¥64.15) by about September 2028, up from CN¥7.3 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as CN¥6.7 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 5.9x on those 2028 earnings, up from 3.8x today. This future PE is lower than the current PE for the US Consumer Finance industry at 10.6x.
Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.03%, as per the Simply Wall St company report.

Qfin Holdings Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Increased regulatory scrutiny and upcoming implementation of new lending rules in October create uncertainty around Qfin's business model, customer acquisition, and take rate, potentially leading to lower loan origination volumes and pressure on top-line revenue growth.
Persistently soft consumer credit demand in China and declining short-term household loans signal weaker effective demand for Qfin's products, making future loan growth and revenue less certain if macroeconomic conditions do not improve.
Asset quality metrics showed deterioration in Q2, with rising risk levels in embedded finance and app channels, declining collection rates, and increased provision bookings, which could translate to higher credit losses and compressed net margins if these trends persist.
The company is experiencing a shift from capital-light to capital-heavy business, which, while generating higher gross revenue rates, also entails slower revenue recognition, higher leverage, and greater reliance on balance sheet funding, increasing exposure to credit cycles and impacting earnings stability.
International expansion is still at a nascent and uncertain stage, with loan volumes in new overseas markets (such as the U.K.) negligible compared to the core business, raising the risk of ineffective capital allocation and adding to operational complexity without near-term earnings contribution.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $50.313 for Qfin Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $59.18, and the most bearish reporting a price target of just $40.25.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CN¥23.0 billion, earnings will come to CN¥8.4 billion, and it would be trading on a PE ratio of 5.9x, assuming you use a discount rate of 9.0%.
Given the current share price of $29.15, the analyst price target of $50.31 is 42.1% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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