Substantial progress in China-U.S. trade and confirmed growth expectations for company performance drove LexinFintech up 11.81%

According to the Zhitong Finance APP, on Monday (May 12) Eastern Time, U.S. stocks closed higher, driven by key achievements in China-U.S. trade negotiations and companies entering a certain growth trajectory. China's leading new consumption digital technology service provider Lexin (LX.US) rose 11.81%, closing at $8.71, with a trading volume of $34.4157 million that day.

Lexin's stock price opened high and climbed throughout the day, reaching $8.86 at one point during the session, with the 11.81% increase at closing marking a new high in nearly a month and a half. After-hours data also showed that Lexin rose slightly by 0.23% after the market closed.

On the macro front, on the afternoon of May 12, the "Joint Statement of the China-U.S. Geneva Economic and Trade Talks" was released, attracting global market attention, with stock markets in various countries rising collectively. China-U.S. stock index futures also increased, while the renminbi appreciated alongside a rise in the U.S. dollar index. Industry experts believe that the joint statement indicates a phased achievement in China-U.S. trade negotiations, with tariff delays and reductions exceeding market expectations, significantly reducing the impact of tariffs.

As a result of this positive news, the U.S. stock market ignited investor enthusiasm on that day, with all three major indices closing higher and reaching new highs. The Dow Jones Industrial Average rose by as much as 2.81%, the Nasdaq surged 4.35%, and the S&P 500 index increased by 3.26%.

Popular Chinese concept stocks also performed well in this wave of market activity, with most stocks experiencing gains. The Nasdaq China Golden Dragon Index (HXC) surged 5.40%, reaching a new high since April 4. Among them, Jiayuda led with an astonishing increase of 67.71%, Century Internet rose 21.31%, Shengda Technology increased by 18.92%, and Lexin, GDS Holdings, Yikatong Technology, BOSS Zhipin, Tuya Smart, and other stocks all rose by more than 10%.

Internally, Lexin's stock price increase is also influenced by the company's performance turning a corner in the third and fourth quarters of last year, with risks continuously decreasing and profits rising consistently, entering a growth fast track.

Key risk indicators for Lexin have improved for several consecutive quarters. In the fourth quarter of last year, Lexin's early risk indicators for new assets, FPD7, decreased by about 8% quarter-on-quarter, and FPD30+ decreased by about 9%; the overall asset collection rate decreased by about 4% quarter-on-quarter, and the 90+ delinquency rate decreased by 3% quarter-on-quarter.

As a result, profits have significantly improved. Over the past four quarters, Lexin's profits (Non-GAAP EBIT) for 24Q1, 24Q2, 24Q3, and 24Q4 were 282 million, 307 million, 409 million, and 460 million, respectively, with quarter-on-quarter growth rates of 9%, 33.2%, and 12.5%. Profits have seen high growth for three consecutive quarters, confirming that Lexin's performance has returned to a certain growth trajectory.

As the first-quarter results are about to be announced, the past excellent performance and growth trend have been established, and the market generally holds a relatively optimistic attitude towards the new quarter's performance.

At the same time, Lexin is continuously improving its high shareholder return mechanism. As a company that values shareholder returns, Lexin has previously stated that starting this year, it will further increase the company's dividend payout ratio to 25% of net profit. Prior to this, Lexin had a tradition of distributing dividends twice a year, and the quarterly report indicated that the company would distribute a cash dividend of approximately $0.11 per ADS in the second half of the year, which will be paid on May 16 In the past two months, several well-known brokerages, including UBS, Bank of Communications, Citigroup, CITIC Securities, and Huatai, have released research reports covering Lexin. Many have raised their target prices. For instance, in a recent report, UBS not only maintained its "Buy" rating for Lexin but also raised the target price to $13.6, which is 41.7% higher than the previous report's $9.6.

It is reported that Lexin was established in August 2013 and is based in Shenzhen, China. It has been actively connecting millions of young Chinese consumers with new consumer brands through its platforms, promoting the brand concept of "easy consumption and flexible turnover." Lexin officially listed on the NASDAQ in December 2017