On Tuesday, Citi updated its financial outlook for Lufax Holding Ltd (NYSE:LU) shares, a leading technology-empowered personal financial services platform in China. The firm's analyst has increased the price target to $3.13, up from the previous $2.75, while keeping a Neutral rating on the stock.
During Lufax's third-quarter financial briefing of 2024, the company's management discussed several key points that influenced Citi's revised projections. Notably, Citi has adjusted Lufax's expected earnings for the years 2024 through 2026, taking into account a weaker-than-anticipated core profit.
This is primarily due to elevated provision expenses, which are anticipated to persist until the business transition is completed after the second quarter of 2025.
Despite these adjustments, Citi has slightly raised its return on equity (ROE) assumptions for Lufax for the period from 2027 to 2030. This change is based on the recent policy changes in China, which are expected to stimulate consumption through fiscal measures. These developments are seen as positive for Lufax's consumer finance business.
The revised earnings forecast and the updated ROE projections have led Citi to conclude that the fair book value for Lufax in 2025 is 0.2 times, with a target price of $3.13. The Neutral rating remains unchanged as Citi anticipates a more significant profit turnaround for Lufax in 2025.
InvestingPro Insights
Recent data from InvestingPro adds context to Citi's analysis of Lufax Holding Ltd. The company's market capitalization stands at $2.63 billion, with a notably low P/E ratio of 2.2, suggesting the stock may be undervalued relative to its earnings. This aligns with an InvestingPro Tip indicating that Lufax is "Trading at a low earnings multiple."
The company's financial health appears mixed. While Lufax boasts a strong gross profit margin of 73.21% for the last twelve months as of Q3 2024, another InvestingPro Tip warns that "Analysts anticipate sales decline in the current year." This caution is reflected in the modest revenue growth of 0.1% over the same period.
Investors should note that Lufax's stock has shown significant volatility, with a 73.81% price return over the past year and a 50.4% return over the last six months. This performance supports another InvestingPro Tip stating that the "Stock generally trades with high price volatility."
For readers interested in a deeper analysis, InvestingPro offers 14 additional tips for Lufax, providing a more comprehensive view of the company's financial position and market performance.
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