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As Chinese Economy Recovers, Qfin Holdings Looks Shockingly Cheap (NASDAQ:QFIN)

  //stocks-investing.news-articles.net/content/202 .. holdings-looks-shockingly-cheap-nasdaq-qfin.html
  Published in Stocks and Investing on Wednesday, October 29th 2025 at 1:30 GMT by Seeking Alpha
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QFIN: A Shockingly Undervalued Stock as China’s Economy Rebounds

China’s economic recovery from the pandemic‑driven slump has once again drawn the attention of investors looking for undervalued growth plays. The latest Seeking Alpha analysis focuses on QFIN (ticker: QFIN), a Chinese fintech firm that has been overlooked by the broader market despite solid fundamentals and a favorable macro backdrop. The author argues that the stock is trading at a price that makes it one of the most attractive opportunities on the market, especially when viewed in the context of China’s rapid rebound and the firm’s own earnings trajectory.

1. Macroeconomic Landscape

The piece opens with a concise overview of China’s macroeconomic recovery. GDP growth in the second quarter rose to 6.5 %, up from 2.3 % in the same period last year, signalling a strong rebound from the COVID‑19 lockdowns. Consumer spending, the engine of China’s growth, climbed 7 % YoY, while the retail sector recovered almost to pre‑pandemic levels. The Chinese government has maintained an accommodative policy stance, easing monetary policy, cutting borrowing costs, and rolling back some of the heavy regulatory crackdowns that had slowed the fintech sector.

The article also highlights the improving business environment for fintech companies. With banks adopting more digital solutions, the demand for third‑party payment processors and wealth‑management platforms is on the rise. The author cites the recent issuance of the “Digital Finance Innovation Pilot” policy, which encourages the integration of digital technologies into traditional finance, further boosting the prospects for firms like QFIN.

2. QFIN’s Business Model and Growth Drivers

QFIN is positioned as a comprehensive financial technology provider offering payment solutions, digital wallet services, and micro‑loan products to both consumers and merchants. Its core revenue streams are:

1. Transaction Fees – Charging merchants a commission on each digital payment processed.
2. Subscription Fees – Monthly fees from consumers for premium services such as credit scoring, investment advisory, and loyalty programs.
3. Interest Income – From micro‑loans extended through its proprietary platform.

The author details the company’s growth trajectory over the past three years. QFIN’s revenue grew from RMB 500 million in 2020 to RMB 1.2 billion in 2022, a compound annual growth rate (CAGR) of 30 %. Gross margins expanded from 35 % to 42 %, reflecting improved scale and cost efficiencies. Operating expenses grew at a slower rate, resulting in an EBIT margin of 12 % in 2022 compared with 7 % in 2020.

A key driver of QFIN’s growth is its partnership network. The firm has secured agreements with over 10,000 merchants across China, including major e‑commerce platforms and small‑to‑medium enterprises. The article notes that QFIN’s average transaction value increased by 18 % year‑on‑year, driven by the rollout of a new mobile‑wallet feature that integrates loyalty rewards and instant micro‑loans.

3. Valuation Analysis

The article offers a detailed valuation comparison between QFIN and its peers, such as Ant Financial (BABA), Tencent (TCEHY), and JD.com (JD). QFIN is trading at a forward P/E of 12.5x, whereas Ant and Tencent are trading at 28x and 26x, respectively. The author argues that QFIN’s valuation is justified by its superior growth prospects, lower cost structure, and the lack of a dominant player in its niche market.

Using a discounted cash flow (DCF) model, the author projects QFIN’s free cash flow to grow at 25 % in the next five years, then taper to 8 % in the long term. The resulting intrinsic value per share is calculated at RMB 23.40, implying a 25 % upside from the current market price of RMB 18.70. The article emphasizes that this valuation range places QFIN well below its 3‑year average, suggesting a significant margin of safety for potential investors.

4. Risk Factors

While the article is bullish, it does not shy away from discussing risks. The main concerns identified are:

• Regulatory Scrutiny – The Chinese government’s stance on fintech remains uncertain. Recent regulatory changes targeting anti‑money‑laundering compliance could increase operational costs.
• Competitive Landscape – Larger players like Ant and Tencent could intensify competition, especially in the micro‑loan space.
• Currency Exposure – A sharp devaluation of the RMB could erode profitability if the company has significant foreign currency liabilities.

The author acknowledges these risks but argues that QFIN’s robust cash flow position and diversified revenue mix provide resilience against regulatory and competitive shocks.

5. Conclusion and Investment Thesis

The article concludes that QFIN’s stock price does not reflect its strong fundamentals and the favorable macro environment. The author recommends a “Buy” rating, citing the upside potential, low valuation, and the company’s unique position in China’s digital finance landscape. The article ends with a note that investors should monitor regulatory developments closely and consider a portfolio allocation of up to 8 % in QFIN for long‑term upside.

Additional Context from Follow‑Up Links

1. QFIN Investor Relations Page – Provides recent quarterly reports and earnings calls. The 2022 earnings call highlighted a 35 % increase in merchant acquisition and a 20 % rise in average loan size, reinforcing the growth narrative.

2. China’s “Digital Finance Innovation Pilot” Policy – Details the government’s strategy to embed digital technologies across the financial sector, offering incentives for firms that integrate AI and blockchain into payment systems. QFIN’s upcoming platform upgrade is slated to incorporate AI‑driven fraud detection, aligning it with policy objectives.

3. Macro Analysis on China’s Economic Recovery – Offers deeper insights into consumer confidence indices, retail sales data, and the impact of easing travel restrictions. The macro analysis supports the assertion that the fintech sector will benefit from rising consumer spending and greater digital adoption.

These additional sources corroborate the article’s core arguments and provide a richer backdrop for understanding QFIN’s market positioning. The combination of a rapidly improving economy, favorable regulatory support, and QFIN’s strong operational metrics creates a compelling case for the stock’s upside potential.