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author | rousseau

in 1999, china's internet set off the first wave of entrepreneurship. tang yue was also part of this wave, but compared with jack ma, robin li, zhou lei, and zhang chaoyang, tang yue's name was a little unfamiliar.

tang yue, who had worked in wall street for seven years, co-founded elong.com with his team. this platform became an important rival of ctrip for a long time.

in 2006, tang yue, who successfully took elong public, resigned as ceo and became an investor. however, eight years later, facing the tide of internet finance, he ventured into it again and founded xiaoying technology.

during the heyday of p2p, xiaoying technology was not considered a leading company, but it survived the shock of industry liquidation. to this day, tang yue still holds 91.5% of the voting rights and firmly controls the company.

in the first half of this year, xiaoying technology achieved double growth in revenue and profit, with both growth rates being double digits.

#1 declining transactions do not hinder profit

xiaoying technology may be one of the few loan assistance platforms that can currently maintain growth in both revenue and profits.

in a downward cycle, active borrowers tend to be conservative in risk awareness and their risk tolerance will also decline. under this premise, the number of small-win borrowers increased from 1.47 million to 1.64 million, an increase of 11%.

in the second quarter of this year, xiaoying technology's revenue was 1.37 billion yuan, a year-on-year increase of 12.5%. from the fourth quarter of 2022 to the present, xiaoying has maintained double-digit revenue growth.

the net profit performance was even more impressive, with a net profit of 420 million yuan, a year-on-year increase of 13.4%, and a net profit of 780 million yuan in half a year. xiaoying's revenue is less than half of creditease, but its net profit is three-quarters of the latter. compared with other platforms, the net profits of weixin jinke, lexin, creditease, jiayin technology, and yirenzhike fell by 60.2%, 53.2%, 15.6%, 15.7%, and 6.1%, respectively. it is enough to see that xiaoying technology's net profit performance is very outstanding.

the outstanding performance of net profit helped xiaoying's net profit margin reach 30.3%, which is a new high since the industry clearance in 2019. it can be basically concluded that xiaoying has shown counter-cyclical growth performance.

the increase in borrowers is in line with the characteristics of the current cycle, and the decline in the scale of borrowing is also in line with the characteristics of this cycle. in the second quarter, the total amount of loans facilitated and issued by xiaoying was 22.7 billion, a year-on-year decline of 12%.

however, the decline in loans does not affect xiaoying's revenue growth, which needs to be broken down. xiaoying's revenue structure includes loan facilitation service fees, post-loan service fees, financing income, and other income.

new businesses have increased xiaoying's revenue. guarantee income has been added since 2023, contributing 45.6 million this quarter.

the downturn reduced the ability to repay in advance and increased the loan balance, which led to a significant increase in xiaoying's main business. loan facilitation is the main business, with a revenue of 730 million and an increase of 2.3%, which is mainly due to the expected decline in the early repayment rate. the reduction in early repayments will increase interest rates, which will increase xiaoying's revenue accordingly. the increase in the average loan balance led to an increase in financing income to 350 million, a year-on-year increase of 28%. post-loan service fees were 150 million, a year-on-year increase of 10.2%, mainly due to the cumulative effect of the increase in the number of loans in the previous quarters.

in terms of operating indicators, xiaoying's data is impressive, but the average loan balance has increased and the prepayment rate has decreased, which is an external manifestation of risks at this stage.

#2 difficulty in controlling bad debt rate

xiaoying’s bad debt control is not ideal.

at the end of the second quarter, the delinquency rates of xiaoying technology's outstanding loans overdue for 31-60 days and 91-180 days were 1.29% and 4.38% respectively. in vertical comparison, these three data have increased significantly in the last three quarters. the overdue rate of 30-60 days has been above 1% for four consecutive quarters; the overdue rate of 90-180 days has reached a historical high.

in a horizontal comparison, the overdue rate of 90+ days of creditease technology in the second quarter was 2.65%, much lower than that of xiaoying technology. lexin’s overdue rate of 30+ days was less than 1%, and the overdue rate of 90+ days was 3.7%, also lower than that of xiaoying. weixin jinke’s overdue rate of 30-90 days was higher, but the overdue rate of 90+ days was 3.82%. jiayin technology’s overdue rate of more than 180 days was 2.6%. in comparison, xiaoying technology’s overdue rate is relatively high.

xiaoying technology's main product, card loans, is aimed at young consumers, with a maximum credit of 50,000 yuan and a maximum of 12 installments. it meets the characteristics of small and dispersed amounts, and in theory the risk is not large, but it is clear that xiaoying technology's bad debt rate is not good.

against this backdrop, xiaoying said that asset quality has improved and it has decided to relax strict control over loan volume, and expects loan volume to gradually recover in the second half of the year. from a month-on-month perspective, loan volume this quarter has increased compared to the first quarter. xiaoying expects that it will further increase to between 26 billion and 27.5 billion in the third quarter, reaching the average level of last year.

the delinquency rate is increasing, but xiaoying has further relaxed the loan amount, and the risk control pressure of the platform may increase further. it is worth noting that as of the end of 2023, xiaoying has only 47 risk management personnel, which is the second smallest type of job. the difficulty of risk control is obviously higher, and the cost may also be greater.

in the second quarter, xiaoying's origination and service fees were 420 million yuan, an increase of 19.1% year-on-year, mainly due to the cumulative effect of the increase in loan volume in previous quarters, which led to an increase in collection fees. provision for loans receivable was 95.9 million yuan, a significant increase of 73% year-on-year, mainly due to the increase in loans receivable held by the company.

this data indicates that as the amount of loans increases in the future, xiaoying’s cost control may be under pressure if the scale of risk control personnel is not large, and the platform’s risk control needs to be more cautious.

#3 5 markets to conquer the world

xiaoying technology said its focus remains on sustainable profitability. "we are committed to profitable growth while exploring various avenues to further improve shareholder returns."

judging from the equity, xiaoying's voting rights are concentrated in the hands of the management, and the equity is also controlled by the management. among them, tang yue holds 36.79% of the equity. by increasing shareholder returns, the biggest beneficiary is undoubtedly tang yue.

judging from the financial reports of recent years, it is not difficult for the loan facilitation industry to make a profit. since it only connects with the borrower, the platform does not need to pay large-scale interest costs for the loan funds, so the main platforms currently maintain stable profits. from this perspective, xiaoying technology has a high degree of certainty in maintaining profitability.

from the perspective of operation, xiaoying's concept is very different from other platforms. xiaoying combines operating costs and expenses together. therefore, in the financial statements, there are no items such as sales expenses and r&d expenses, but only items such as origination and service expenses, borrower acquisition and marketing expenses, loan receivable provisions, and contingent secured liabilities.

origination and service fees are analogous to operating costs, and borrower acquisition and marketing fees are analogous to sales expenses. in the second quarter, borrower acquisition and marketing expenses fell by 2.6%, indicating that xiaoying is compressing sales expenses. in fact, in the past two years, xiaoying's marketing department may have been in name only. at the end of 2022 and 2023, xiaoying technology had only 5 employees in the marketing department. in comparison, yirenzhike, xinye technology, etc. have the most sales staff. of course, it may also be related to organizational management, such as incorporating sales into the business, or directly using an outsourced team. regardless of the reason, xiaoying's focus on customer acquisition is difficult to compare with competitors.

at the same time, loan assistance platforms are generally seeking to expand overseas. creditease technology directly listed its international business separately in its financial report, while xiaoying technology did not mention its overseas business. in terms of business sector, it lacks an important growth driver.

this series of signs shows that xiaoying technology has no plans to further expand its scale and invest in new businesses. based on the existing business, tapping user value and returning shareholders is the company's main line. as long as the risks are controlled, the company is actually in the stage of making money without doing anything.