In capital markets, value may arrive late, but it will never be absent. The stock price performance of Yixin Group (02858), which recently revealed the 2023 report, once again confirms this.

On March 1, Yixin Group opened more than 10% higher after the results, and at one point the intraday increase was close to 26%. By the close of the day, Yi Xin closed up 13.79% to HK$0.66. On the evening of the last trading day, Yi Xin “published” a strong financial “report card”: revenue for the full year of 2023 surged 29% to 6.686 billion yuan (RMB, same unit), and adjusted net profit increased 32% to 910 million yuan. In addition, Yi Xin continued the large dividend attitude of the previous year. The company plans to pay a final dividend of HK3 cents per share, accounting for about 30% of net profit per share during the reporting period.

According to the Zhitong Finance App, the high increase in core financial data confirms that Yixin Group's long-term strategy with fintech and the new energy vehicle business as the main growth gripper has achieved remarkable milestones. However, the secondary market “heard the song and knew how to say it” immediately “raised their voices and welcomed it”, which also showed that smart investors first started the “value revaluation” logic of trading companies based on the consolidation of Yixin Group's position in the industry, the volume of core potential businesses, and the certainty of profit trajectory.

New energy vehicles and fintech “dual engines” drive high performance growth

Looking through Yixin Group's annual report, it can be said that the company has achieved all-round high-quality growth.

First, as far as scale is concerned, Yi Xin continued to “make the cake bigger” during the reporting period. Financial reports show that in 2023, Yi Xin achieved 678,000 financing transactions, an increase of 22% over the previous year; the volume of financing transactions reached 65.9 billion yuan, an increase of 24% over the previous year.

Yixin Group accelerates the release of auto finance transaction volume in 2021-2023

Looking at the structure, Yi Xin's new car business was once again “Gao Zuo Kaige”. The number of new car financing transactions completed throughout the year was 39,000, an increase of 51% over the 265,000 in the same period in 2022; the corresponding financing amount reached 40.2 billion yuan, an increase of 57% over the previous year.

It is worth mentioning that in terms of business strategy, Yi Xin did not blindly pursue expansion, but was targeted. One example is that Yi Xin has adopted a more prudent business strategy for the used car business and has taken the initiative to reduce risk exposure. During the period, Yi Xin's number of used car financing transactions was 279,000, which is basically the same as the previous year.

At the same time, the financial performance of Yixin Group is also impressive. Financial reports show that in 2023, Yi Xin's revenue increased 29% to 6.686 billion yuan. Among them, new revenue from core business (including loan facilitation services, SaaS services and revenue from new proprietary transactions) increased 25% year-on-year to 4.664 billion yuan; adjusted net profit increased 32% to $910 million.

According to the Zhitong Finance App, the core logic of the reason why the Yixin Group was able to achieve high-quality growth is that the company's forward-looking new energy vehicle and fintech businesses will enter a centralized cash out period in 2023, which has brought considerable incremental results to Yi Xin.

Back in time to 2021, Yi Xin was keenly aware that there was huge and unmet financial demand in the high-growth, policy-driven industry of new energy vehicles. Back then, Yi Xin cooperated with GAC Aian. Over the next few years, Yi Xin continued to increase cooperation with new energy vehicle OEMs and established cooperative relationships with brands such as Ideal Auto, Nacha Auto, and NIO Auto.

After a long period of layout, by the end of 2023, Yi Xin had reached cooperation with over 10 new car builders and 25 traditional joint venture OEMs in the new energy business. As reflected in data, Yixin's NEV financing transaction volume increased to 116,000 units in 2023, an increase of 206% over the previous year; the corresponding financing transaction amount reached 12.4 billion yuan, an increase of 200% over the previous year. As of the second half of the year, NEV financing had reached 33% of Yixin's new vehicle business.

Coincidentally, Yi Xin has also been involved in the field of fintech for a long time. In 2022, in order to better serve all partners in the auto finance industry chain, Yi Xin set up a fintech platform. At the end of that year, it formed cooperative relationships with nearly 40 institutional customers, with revenue exceeding 100 million yuan during the year. Recently, in 2023, the number of companies that have signed up for this business was further expanded, and 9 new cooperation projects were launched during the year. Looking at the whole year, the amount of financing transactions facilitated through the financial technology model reached 10.2 billion yuan, achieving explosive growth.

Various operating indicators have “advanced rapidly”, while the other side of “coins,” Yi Xin's asset quality is dominated by the word “stable”, which reflects the Group's attitude of prudent development. According to the data, as of the end of 2023, the overdue rate of all Yixin financing transactions (through proprietary financial leasing services and trading platform business) of 180 days or more and overdue rates of 90 days or more (including 180 days or more) were 1.49% and 1.89% respectively, all of which were optimized from the end of 2022.

For the auto finance business, capital requirements are intensive, and smooth financing channels are a prerequisite for scale expansion. It is important for participants to broaden financing channels and reduce capital costs. In the industry, companies can generally use guarantees from parent companies to obtain more bank credit lines, as well as expand long-term funding sources through securitization of auto loan assets, issuing bonds, listing, capital increases, etc.

According to the disclosed information, Yi Xin has extensive financing tools, including the continuous issuance of standardized products such as SCP and ABS/ABN. In particular, in terms of overseas financing channels, the company has reached cooperation with many overseas financial institutions, including Macau's Dafeng Bank. By the end of last year, there were more than 40 investment institutions for Yixin bonds and asset securitization products, with a cumulative financing scale of over 50 billion yuan in the open market.

Growth potential is being unleashed at an accelerated pace, and the value needs to be reassessed urgently

From an industry perspective, the auto finance industry where Yixin Group is located is a typical racetrack with long slopes and heavy snow. In the overall automobile industry chain, the space for auto finance is being viewed as being highly regarded as being on the front line.

This can be seen from the actions of major OEMs. From 2022, BYD announced a capital increase of 4.62 billion yuan for its auto finance company, and SAIC Motor Group acquired about 71.04% of Dongzheng Finance's shares through an equity auction. By November 2023, Dongfeng Auto Finance Co., Ltd. underwent business changes, and the registered capital increased from 1 billion yuan to 4 billion yuan... Behind various actions, I am optimistic about the auto finance circuit and future profit contributions.

On the one hand, China's auto finance services currently account for relatively little profit in the automobile industry chain, and there is plenty of room for potential improvement in the future. According to the “Blue Book on China's Automobile Aftermarket”, in the developed automobile market, auto finance accounts for 23% of profits in the entire automobile industry chain, while in the Chinese automobile market, the vehicle manufacturing side accounts for nearly half of the profits. Automobile services, including automobile finance, maintenance, and car rental, account for only 11%.

On the other hand, in 2022, China's auto finance penetration rate was 51.5%, which is at a lower level compared to mature overseas markets. According to data from the 21st Century New Automobile Research Institute, China's auto finance penetration rate in 2022 was 51.5%. Compared with mature overseas auto markets (US auto finance penetration rate of 86% in 2018, Germany 75%, France 70%), there is still a lot of room for improvement.

Also, considering that the current electric wave in China's automobile industry is still being thoroughly interpreted, the Yixin Group, which is the leading automobile finance trading platform in the meantime, clearly has great potential. Looking ahead, based on its high-density channel network and high-level risk control model, Yi Xin is expected to continue to lead the way in exploring incremental opportunities in the NEV financial market.

It is worth noting that currently Yi Xin is also building an industrial “ecosystem” around new energy related businesses in Canada. In 2023, Yi Xin launched an innovative vehicle and electricity separation and leasing product. This or “spoiler” indicates that the company's future new energy business development strategy will not be limited to the existing business. In the foreseeable future, Yi Xin is expected to continue to expand the “ecosystem” of the industry through industrial investment and strategic cooperation to further lay out new energy related businesses such as autonomous driving and fleet management.

Looking at the fintech business, Yi Xin also seems to have a handle on his mind. According to its forecast, the company's fintech business will maintain a rapid growth trend in the next 2-3 years, and in the longer term, along with the development and improvement of this model, Yi Xin's serviceable market industry will expand from the current specific market segment to the entire automotive consumer finance market.

In addition, Yi Xin also keeps an eye on the latest developments in the world's most advanced AI technology. The Titan cloud platform developed by the company in 2023 already has functions covering various business aspects such as marketing, risk control, customer service, and collection. In the next stage, Yi Xin will accelerate progress towards “Yi Xin 3.0.” At the same time, in order to meet the development trend of the times, in addition to steadily developing domestic business, Yi Xin will also actively explore international development routes to “increase” the overseas blue ocean market.

Returning to the perspective of the capital market, over the past long period of time, investors often used the standards of traditional financial companies to price Yixin Group due to a lack of direct targets for auto finance companies in the market. However, with Yi Xin's forward-looking strategic layout and deepening integration between business and technology, value revaluation may have already begun.

After all, in light of recent performance trends, Yi Xin's growth momentum has not only not slowed, but has shown signs of further acceleration. The company's fundamentals are expected to rise to the next level around the two major long-term “engines” of new energy and fintech. Along with the strengthening of its own technological attributes and the fulfillment of its growth potential, it is expected to usher in value reshaping.