Bank of America Securities analyst Emma Xu has reiterated their neutral stance on LU stock, giving a Hold rating on April 10.
Emma Xu has given her Hold rating due to a combination of factors surrounding Lufax Holding. Lufax’s profit before tax showed a significant year-over-year drop in the first quarter of 2024, although it was an improvement from the previous quarter and better than consensus estimates. However, a one-off withholding tax heavily impacted attributed net profit, resulting in a more substantial loss than anticipated. Despite this, the firm declared a special dividend pending approval at the Annual General Meeting, which reflects a strong cash position but does not offset the concerns about prolonged weak profitability that underpins the Neutral rating.
In the details of Lufax’s operations, while new loans showed a modest quarterly increase, the net margin remained low, indicating continued pressure on profitability. The company’s loan balance has seen a marked decrease both year-over-year and quarter-over-quarter. Although Lufax is taking initiatives towards diversification, as seen in the rise of consumer finance loans in the mix, costs associated with credit guarantee insurance and operating expenses remain a challenge. Improvements in delinquency ratios suggest some recovery in asset quality, but it is still too early to confirm the sustainability of this trend, leading to a cautious outlook and the decision to maintain the Hold rating.
In another report released on April 10, Morgan Stanley also maintained a Hold rating on the stock with a $4.50 price target.
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Lufax Holding (LU) Company Description:
Lufax Holding Ltd is a technology-empowered personal financial services platform in China. The company provides personal lending services to small business owners as well as salaried workers in China, and provides tailor-made wealth management solutions to China’s middle class and affluent population.
