On February 10, Beijing time, MSci (Mingsheng), an internationally renowned index compilation company, announced its latest quarterly index adjustment results in 2022. According to the announcement, five new targets such as Lujin Holdings (NYSE: Lu), Gree Electric Appliances Inc.Of Zhuhai(000651) , Cngr Advanced Material Co.Ltd(300919) were included in the MSCI China all shares index. According to the announcement of MSCI, lufax holdings is the only overseas listed company ADR newly included in the adjustment of China’s all stock index. The adjustment will take effect after the market closes on February 28, 2022.
In fact, this is not the first time that Luc has become associated with MSCI. Public information shows that on October 30, 2021, MSCI announced on its official website that MSCI global standard index series and MSCI China full index series were included in lu.us, and the decision took effect on November 13, 2021.
It should be noted that the previous MSCI global standard index series and the current MSCI China all stock index are MSCI’s flagship index series. In other words, the amount of funds tracking the stock index series around the world is huge.
What does it mean to be included in MSCI? In a word, obtaining the endorsement and blessing of authority has become the “top stream” of the market and won more opportunities to be paid more attention to by themselves.
As an old head index compiling company, MSCI provides important benchmark index reference for investors all over the world and is one of the important reference tools for institutional investment. In the market, “97 of the world’s top 100 largest asset managers are MSCI customers”. In China, its market influence is also recognized by regulators. The research report issued by China Securities Regulatory Commission once described as follows: “MSCI index has extensive global influence. In North America and Asia, more than 90% of institutional international equity assets are based on MSCI index.”
Among the indexes involving Chinese listed companies, the MSCI China all stock index is the most noteworthy. For lufax, the inclusion of the mainstream index in the market will help listed companies broaden their sources of funds and improve their liquidity. The inclusion of the flagship index means that they will receive a large number of international passive funds.
The indisputable fact is that based on the consideration of credibility and using scientific indicators and algorithms, MSCI will only include those “top students” who are among the best in the field of words, have a steady rise in operating performance and stable financial performance. So why Lu Jinsuo?
Taking the latest financial report of lufax as an example, the unaudited financial report for the third quarter of 2021 shows that in the third quarter of 2021, the total revenue of lufax increased by 21.8% year-on-year to 15.924 billion yuan; The net profit in the same period was 4.115 billion yuan, excluding the impact of one-time expenses in the same period last year, with a year-on-year increase of 18.1%. As of September 30, in the first three quarters of 2021, lufax had achieved a total revenue of 46.003 billion yuan, a year-on-year increase of 18.7%, and a net profit of 13.8 billion yuan, a year-on-year increase of 28%.
What is easier to understand than the figures is the layout and adjustment of lufax’s business: lufax was listed on the New York Stock Exchange on October 30, 2020. Before that, lufax had become famous in the industry and was once the world’s largest P2P platform. On the eve of listing, that is, in August 2019, lufax announced that it would completely stop adding P2P services. By the end of the third quarter, the business stock had been completely cleared, and the customer had completely withdrawn from the third quarter.
At present, lufax is in the state of “running on two legs”: first, retail credit, covering small, medium-sized and micro credit and consumer finance business, based on “safe and inclusive”; The second is wealth management, which is based on the digital platform of “lujinsuo”.
Among them, the retail credit business contributes most of the revenue of lufax at present. The business is based on the credit matching mode of guarantee license and sharing risks with multiple parties. The typical customer group of this business service is small and micro enterprise owners with business financing needs. In the third quarter of 2021, the new loan held by lufax was 171.7 billion yuan, a year-on-year increase of 16.2%. Among them, excluding consumer finance subsidiaries, the proportion of loans to small and micro enterprises further increased to 80.5%, up nearly 4.8 percentage points from 75.7% in the same period last year.
The focus on small, medium-sized and micro enterprise owners is the uniqueness of lufax’s retail credit business, which is different from most Internet platforms and traditional banks. In the long run, Huatai Securities Co.Ltd(601688) research report points out that the annual compound growth rate of the balance of personal consumption loans (excluding mortgage loans) and loans to small and micro enterprises from 2016 to 2020 is 14.5%, reaching 57.8 trillion yuan by the end of 2020. Compared with wholesale banking and mortgage loans for large enterprises, the retail credit market covers small and micro enterprise loans, personal consumption loans and operating loans, with a large capital gap.
In addition to the differentiation of target customers, the background color of science and technology is also where Lu Jin distinguishes traditional institutions. Based on its scientific and technological strength, Lujin Institute has built the o2o model of China Unicom Wuxi Online Offline Communication Information Technology Co.Ltd(300959) faster. According to the third quarterly report, Lujin increased the o2o direct sales team mainly serving small business owners from 59000 at the end of the second quarter to about 64000, and the overall productivity increased by 4% month on month.
In this regard, Citic Securities Company Limited(600030) research report believes that the essence of o2o sales model is the all-round improvement of risk control ability: on the one hand, it can put risk control ahead and reduce the risk cost; On the other hand, with the help of perfect post loan management and exclusive collection team, the compliance and recovery rate of collection link have also been guaranteed. The risk control ability guaranteed by technology is the core factor to determine whether the retail credit business can maintain steady growth.
Technology has also brought the frontier system of KYC, Kyp and Kyi to another major business – wealth management. Although at present, the income of wealth management business accounts for no more than 5%, from the perspective of growth, this business is expected to become the second growth curve of lufax. The third quarterly report shows that in the first three quarters of 2021, the number of active investors of lufax increased to 15.3 million, a year-on-year increase of 15.91%; Customer assets with platform investment of more than 300000 yuan accounted for 80.8%, an increase of 3.3 percentage points over the same period last year.
Therefore, Huaxing capital research report concluded that as a large financial technology company with strong joint ventures and ecological support, lufax should enjoy scarce value.
In the context of increasing uncertainty, perhaps the only certainty is the uncertainty itself. However, lufax is still full of confidence in the performance forecast for 2021: the company expects the annual new loans to increase by 15% to 18% year-on-year to reach 649 billion yuan to 665 billion yuan in 2021; Customer assets ranged from 430 billion yuan to 450 billion yuan, with a year-on-year increase of 1% to 5%; The annual total revenue was 61.1 billion yuan to 61.4 billion yuan, an increase of 17% to 18% year-on-year; The net profit was 16.3 billion yuan to 16.5 billion yuan, a year-on-year increase of 33% to 34%.
In view of this, Bank of America Securities, Citic Securities Company Limited(600030) and other well-known securities companies at home and abroad have given positive comments on the “buy” of lufax.
