On Thursday, Jefferies reinstated coverage on Lufax Holding Ltd (NYSE: NYSE:LU) stock with a Hold rating, setting a price target of $3.20. The financial services company, which specializes in personal financial services in China, recently reported third-quarter results that fell short of market expectations in both revenue and earnings.
The transition of Lufax to consumer finance is being undertaken with a cautious approach to Small Business Owners (SBO). The company's adoption of upfront accounting recognition for credit losses under a full guarantee model has resulted in increased costs and net losses at this early stage of its strategic shift.
Looking ahead, Jefferies forecasts a return to positive loan volume growth for Lufax by 2025 following the completion of its transition period. However, the firm also indicated that additional details are necessary to fully understand Lufax's path to profitability.
The coverage reinstatement follows a period where Lufax has been navigating through various macroeconomic headwinds, which have impacted its business operations and financial performance. The Hold rating reflects a neutral stance on the stock, suggesting that the analyst sees neither a strong buy nor sell opportunity at the current time and price level.
In other recent news, Lufax Holding Ltd, a personal financial services platform in China, reported mixed third-quarter results. Despite a steady asset quality and a decrease in finance costs, the company experienced a net loss of RMB 725 million. Total new loan sales for Lufax in Q3 remained consistent with the previous year at RMB 50.5 billion, marking an 11.7% increase from the prior quarter. The company's consumer finance loans saw substantial growth, increasing by 27.8% year-over-year and now representing 52% of total new loans.
Simultaneously, Jefferies reinstated coverage on Lufax, assigning a Hold rating to the company's stock. The reinstatement comes after Lufax's Q3 results, which fell short of market expectations in terms of revenue and earnings. The company is currently transitioning towards consumer finance, which has resulted in increased costs and net losses in the early stages. Jefferies anticipates positive loan volume growth by 2025 following the completion of this transition, but calls for more clarity on Lufax's path to profitability.
These are recent developments that investors should consider as they monitor Lufax's progress and financial health in the context of its ongoing strategic adjustments.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Lufax Holding Ltd's financial situation and market performance. The company's market capitalization stands at $2.5 billion, reflecting its current position in the Consumer Finance industry. Notably, Lufax is trading at a low Price / Book multiple of 0.21, which aligns with the cautious approach mentioned in the article.
InvestingPro Tips highlight that analysts anticipate a sales decline in the current year, corroborating the challenges discussed in Jefferies' analysis. This expectation is further supported by the revenue growth data, which shows a significant decline of 35.28% in the last twelve months as of Q3 2024.
Despite these challenges, Lufax has shown strong short-term market performance, with a 14.68% price return over the last month and a substantial 38.41% return over the past six months. This recent positive momentum could be indicative of market optimism regarding the company's ongoing transition.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Lufax Holding Ltd, providing a deeper understanding of the company's financial health and market position.
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