Jiayin Group Inc - ADR

While earnings seemed to stabilize, Jiayin Group had a late earnings ‘surprise’ and concluded they underestimated the risk on their books a quarter earlier. We still own the stock but did pivot away somewhat before the announcement.

Jiayin Group has faced significant challenges due to recent regulatory changes in the Chinese lending sector, leading to a drastic reduction in net earnings. The company initially guided for a 54%-66% reduction, but actual earnings came in 75% lower than expected. With further guidance indicating a decline in origination for 2026Q1, the outlook remains bleak. The stock trades at an estimated forward P/E of 4.9 and a P/B of 0.37, which may seem attractive, but the ongoing pressure from increased defaults and tighter lending standards raises concerns about its future viability.

The market for Chinese lending intermediaries, including Jiayin, is currently depressed due to a softening economy and a hard 24% lending rate cap. This has led to a significant decline in Jiayin's profits, which are expected to plummet to 40% of what they were in Q3, with sales set to decline around 35%. While there are potential long-term improvements as the number of originations may return to higher levels, the immediate outlook is concerning. The new regulations have made lenders more cautious, and Jiayin's ability to pivot towards more prime lending is uncertain. Overall, the current situation presents a bearish outlook for Jiayin.

Jiayin Group has shown resilience, remaining 70% above our entry levels despite recent declines. The company was a standout performer in Q1, with guidance indicating a near-100% jump in structural profits. Recent regulatory changes from the Chinese Communist Party could impact the sector, but the potential downsides are manageable. While Jiayin does lend above the 24% interest rate mark, the regulations aim to curtail excessive rates rather than eliminate them. Additionally, the consolidation of smaller competitors could enhance Jiayin's competitive position. We believe the overall scenario remains favorable, prompting us to add to our position.

Jiayin experienced some profit taking last two weeks after being the first to benefit.

We are excited about Jiayin Group, which is now almost 150% up since we bought but remains distant from fair valuations, especially given their recent enticing guidance. This performance indicates strong potential for future growth, and we believe the company is undervalued relative to its prospects. Our deep value approach has led us to identify Jiayin Group as a significant holding, reflecting our confidence in its ability to deliver returns.

Jiayin Group is a compelling investment due to its extremely low valuation metrics, with an EV/EBITDA multiple below 1 and a P/E of around 3, even after a significant rise. The company operates as a high-interest lending intermediary in China, leveraging a capital-light model. Its income streams from loan facilitation, guarantees, and direct lending are promising, especially as the market for such services is expected to grow. The founder-CEO's substantial investment in the company aligns his interests with shareholders, and the company's prudent management has shown resilience through economic fluctuations. Additionally, advancements in AI are enhancing their credit assessment processes and operational efficiencies, positioning Jiayin for future growth.

Jiayin Group has shown remarkable performance, with revenues growing 38% year-on-year and guidance for the next quarter indicating an additional 26% growth. Profits are also set to rise significantly, with income from operations increasing 26% quarter-on-quarter and 69% year-on-year, and projected to be 87% higher than a year ago. This suggests that Jiayin's growth story remains intact, and the stock is trading at just 2.5 times forward earnings, even after a substantial price increase. The manager believes that the recent earnings slump was likely cyclical, reinforcing the investment case for Jiayin Group.

Jiayin Group has shown remarkable performance, with revenues growing 38% year-on-year and guidance indicating a further 26% growth for the next quarter. Profits are also set to rise significantly, with income from operations increasing 26% quarter-on-quarter and 69% year-on-year, and projected to be 87% higher than a year ago. This suggests that Jiayin's growth story remains intact, and the stock is trading at just 2.5 times forward earnings, even after its recent price doubling. The manager believes that the company can continue to grow at a solid pace, indicating a strong investment case.

Jiayin Group has shown remarkable performance, with revenues growing 38% year-on-year and guidance for the next quarter indicating an additional 26% growth. Profits are also set to rise significantly, with income from operations increasing 26% quarter-on-quarter and 69% year-on-year, and projected to be 87% higher than a year ago. This suggests that Jiayin's growth story remains intact, and the stock is trading at just 2.5 times forward earnings, even after a substantial price increase. The company continues to demonstrate solid growth potential, making it an attractive investment.