Event: on December 24, according to China Cinda, Chongqing ant Consumer Finance Co., Ltd. (hereinafter referred to as “ant consumer finance”) plans to issue an additional registered capital of 22 billion yuan. After the capital increase, the registered capital will increase from 8 billion yuan to 30 billion yuan.
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We believe that the core reason for the capital increase is to undertake the consumer credit demand of “flower chant” and “borrow chant”, but the lack of registered capital restricts it. 1) Ant Xiaojin opened on June 3 this year and will undertake the task of business rectification as the main body of ant group’s consumer credit business. According to the rectification plan, ant Xiaojin must complete the brand rectification of “Huabai” and “borrow Bai” within 6 months of opening, and orderly undertake the consumer credit business of two small loan companies as the main operators of “Huabai” and “borrow Bai” within 1 year of opening; 2) In November, “Huabai” and “borrow Bai” have successively started brand isolation and become the exclusive consumer credit products of ant consumer gold. The consumer credit products fully funded by other financial institutions have been updated to “credit purchase” and “credit loan” respectively;
3) Referring to the average leverage level of commercial banks, the leverage of ant Xiaojin can reach about 12 times, and the notice on further standardizing the Internet loan business of commercial banks stipulates that under the joint loan mode, ant Xiaojin must contribute no less than 30%. At present, the registered capital of ant consumer fund is 8 billion yuan, which can meet the consumer credit demand of about 96 billion yuan and 320 billion yuan at most under the mode of separate loan and joint loan. According to the prospectus of ant group, as of June 2020, the consumer credit balance of ant group totaled 1.73 trillion yuan, with a large gap between supply and demand. It is estimated that after the capital increase is completed, ant Xiaojin can meet the consumer credit demand of 360-120 billion yuan. Follow up or further capital increase with business development.
After the completion of the capital increase plan, the state-owned assets background of ant Xiaojin is deepened and the shareholders are more diversified. According to the capital increase plan disclosed by China Cinda, if the capital increase is completed, then: 1) the shareholding ratio of ant group remains unchanged at 50%; 2) As the second largest shareholder, Cinda’s voice may be further enhanced. It participated in the subscription with RMB 6 billion in cash. With the shares previously held by its subsidiary Nanyang Commercial Bank, its shareholding in the future may be increased from 15% currently held indirectly to 24%; 3) New shareholders include sunny optics Boguan Technology (under Netease) and Yufu capital (under Chongqing SASAC) hold 6.0%, 4.4% and 2.6% respectively, and the other shareholders include Jiangsu Yuyue Medical Equipment And Supply Co.Ltd(002223) , Cathay Shihua, Contemporary Amperex Technology Co.Limited(300750) and China Transinfo Technology Co.Ltd(002373) China Huarong holds 4.99%, 2.7%, 2.1%, 1.9% and 1.3% respectively. Compared with the existing shareholder structure, the state-owned capital background of ant Xiaojin after the capital increase is further strengthened, and the involvement of industrial capital such as Shunyu optics and boguan technology further enriches the shareholder background.
The capital increase has significantly enhanced business capacity and is expected to become a leader in the consumer finance industry. 1) As of December 25, there were 30 consumer finance companies in China. The registered capital of the head companies Zhaolian Xiaojin, home credit Xiaojin and Ping An Xiaojin were 10 billion yuan, 7 billion yuan and 5 billion yuan respectively. Ant Xiaojin will jump to the first and take a significant lead after the capital increase is completed; 2) According to China Cinda’s announcement, as of September 30, ant consumer gold has realized an operating revenue of 291 million yuan and a total asset scale of 60.1 billion yuan in the three months since its opening. We believe that under the business model of Internet consumer finance, the traffic platform has core advantages, and the market is expected to maintain a high industry concentration. It is expected that with the completion of the capital increase, the asset scale and performance of ant Xiaojin will be significantly improved; 3) In the follow-up, we can pay attention to the adjustment of the company’s business after the entry of China Cinda and other state-owned assets.
Investment suggestion: the adjustment of current regulatory policies will accelerate the return of fintech companies to their roots, and benefit the regular army under the guidance of “licensed” operation. Ant group’s business rectification has been carried out in an orderly manner, and its advantages in traffic and technology are still leading. It is recommended to pay attention to it.
Risk warning: the regulatory policy is tightened; Intensified market competition; The company’s business rectification progress is less than expected
