Hidden Gem in China’s Fintech Market?
Yiren Digital is likely not a company you have heard of but in China it has been growing like a weed thanks to two primary fintech offerings: CreditTech and Wealth Management.
With the rapid growth of China’s fintech sector and the increasing demand for digital financial services, Yiren Digital has been putting up numbers that demand a closer look.
It also jumped onto our radars after a period of regulatory crackdowns on fintech firms in China because it was one of the first fintech companies in China to receive an Internet Microfinance License from the China Banking Regulatory Commission. This license permits Yiren Digital to operate in a highly regulated environment, ensuring compliance and fostering user trust.
Key Points
- Yiren Digital is trading at a rock bottom price-to-earnings ratio and has some key competitive advantages.
- The company saw a 72% increase in loan volume and a 59% rise in borrowers during its most recent earnings report.
- The Chinese fintech firm stands out with a perfect Piotroski score of 9 and low valuation metrics.
Massive Market Opportunity
According to iResearch, the market size of China’s online lending industry is expected to reach RMB 3.1 trillion by 2025 as internet penetration grows, and thanks to rising consumer demand for credit as well as the government’s push towards digital finance.
Yiren Digital has a few aces up its sleeve to capitalize on this market opportunity. Beyond the regulatory compliance approval that sets it apart from many competitors, the company has embraced artificial intelligence and big data analytics allows it to assess credit risk accurately and provide personalized financial solutions.
It’s also got a diverse product portfolio that includes personal loans, business loans, and wealth management services so it can serve a wide variety of customer needs and limit dependence on a single revenue stream.
What’s Up With the Financials?
In its latest financial report, the company posted a 72% increase in total loan volume and a 59% rise in the number of borrowers.
CreditTech remains a significant revenue driver for Yiren Digital as it expands loan offerings to underserved segments, such as small and medium-sized enterprises (SMEs).
Wealth Management has also seen increasing traction, with a growing number of high-net-worth individuals looking for digital investment solutions. The company’s platform and extensive product offerings provide a springboard to a larger share of this market.
It’s also formed partnerships with leading financial institutions and technology companies to roll out product offerings to a broader customer base.
With all that said, the Chinese fintech market is highly competitive, with numerous players vying for market share. Still, Yiren Digital’s regulatory standing, technological innovation and diverse product portfolio provide a competitive edge.
From our research, Yiren appears to be a compelling investment opportunity given its pristine piotroski score of 9, aggressive buyback of shares by management, low price-to-book multiple and rock bottom price-to-earnings multiple of just 1.5x.
If we were to summarize the opportunity, it’s a leading player in a burgeoning Chinese fintech market that has demonstrated strong revenue growth, good profitability closing in on $100m per quarter, is in a large and growing market, and uses the latest technology to support risk assessments of borrowers.
