Chapter 1

Qifu Technology: the business and its repricing

Qifu Technology (Nasdaq: QFIN) runs one of China's largest AI-driven consumer-credit platforms, matching 63.6 million credit-approved users with banks. In 2025 it earned ¥6.0 billion (about US$857 million) on ¥19.2 billion of revenue and generated ¥11.1 billion of operating cash — yet its shares have fallen from a 52-week high near US$46 to about US$13, below its own book equity and near twice trailing earnings. This report weighs whether that de-rating is deserved.

What the company does

Qifu — known in China as Qifu Jietiao, and formerly listed as 360 DigiTech / Qifu Technology before the 2025 rename to Qfin Holdings [1] — is not a bank. It is a technology platform sitting between borrowers and licensed lenders. Its Argus risk engine screens applicants, and its financial-institution partners supply the funding; Qifu earns fees across the loan lifecycle, from acquisition and credit assessment through servicing and collection [2].

The business runs in two economically distinct modes. Under credit-driven services (capital-heavy), Qifu takes on the credit risk through guarantee or consolidated-trust structures and keeps the spread; under platform services (capital-light, including its Intelligent Credit Engine), it passes borrowers to banks for a fee and bears no credit risk. In 2025 credit-driven services produced ¥14.0 billion of revenue and platform services ¥5.2 billion [3]. Which of these two models the company leans on — and how much credit risk it therefore holds — is a thread later chapters take up.

Source: FY2025 Annual Report (Form 20-F), Item 4 Business and Item 5 MD and A [4] [5].

Scale is not the story it once was. Qifu facilitated ¥327.1 billion (US$46.8 billion) of loans in 2025 — a slight rise on 2024 but below the ¥369.1 billion peak of 2023, after management deliberately shrank volume in 2024 to prioritize loan quality amid softening demand [6] [7]. The user base kept growing — 50.9 million approved users at end-2023, 56.9 million at end-2024, 63.6 million at end-2025 — and repeat borrowers supplied 93.3% of 2025 volume, a sign of a sticky, revolving-credit franchise rather than a customer-acquisition treadmill [8].

Source: FY2024 and FY2025 20-Fs, loan facilitation volume; converted at the FY2025 convenience rate [9].

The financial engine

The numbers behind the platform are the reason this is a case worth studying. Revenue grew 12% in 2025 to ¥19.2 billion (US$2.75 billion), and operating cash flow rose 19% to a record ¥11.1 billion (US$1.59 billion) [10] [11]. Return on equity ran near 25% on ¥24.2 billion of book equity [12].

Source: FY2025 20-F, Statements of Operations and Summary Cash Flow Data [13] [14].

One line in that grid does not fit the growth story: net income fell 4% in 2025 even as revenue and cash flow climbed. The reason is provisioning. Qifu added back ¥4.2 billion of credit provisions and ¥1.7 billion of guarantee-liability provisions in 2025, up from ¥3.5 billion and ¥0.5 billion in 2024 — reserves it built against future defaults as the environment tightened [15]. Rising cash and falling accounting profit at the same time is the sharpest tension in the numbers, because whether those reserves prove conservative or merely timely shapes how much of the reported earning power is real. That question belongs to a later chapter on credit and accounting quality; here it is enough to mark it.

Source: FY2025 20-F, Summary Cash Flow Data (five years); converted at the FY2025 convenience rate [16].

Operating cash flow has risen every year since 2021, nearly doubling over the span. That cash is what funds the capital returns below — and what a buyer at today's price is being handed at a low multiple.

The repricing

QFIN's ADS changed hands around US$13.4 in late July 2026, inside a trailing-twelve-month range of US$11.31 to US$46.18 (Nasdaq market data). The scale of the fall is easiest to see through the company's own convertible notes: in March 2025 Qifu sold US$690 million of 0.50% notes due 2030 with a conversion price of about US$59.71 per ADS [17]. Roughly fifteen months later the stock trades near a fifth of that strike, and the company has been buying the same notes back on the open market — about US$577 million of principal repurchased for US$502 million of cash by late May 2026 [18].

Source: Nasdaq market data (July 2026) and FY2025 20-F book equity of US$3.45B; market value derived from 243.8M ordinary shares (121.9M ADS) [19].

At that price the arithmetic is stark. A market value of about US$1.6 billion sits against US$3.45 billion of book equity — roughly half of book — and against US$857 million of 2025 net income, a trailing multiple close to two times earnings [20]. Even on consensus that expects earnings to fall in 2026, the forward multiple sits in the low single digits. Multiples this low usually signal that the market doubts the durability of the earnings, not merely their level.

Source: Nasdaq daily closing prices, January–July 2026 (month-end sampling); the trailing-twelve-month peak near US$46 predates this window.

The proximate trigger is regulatory. In April 2025 China's National Financial Regulatory Administration issued a notice on internet loan-facilitation, effective October 2025, that introduced a "whitelist" system requiring banks to vet and continuously evaluate the platforms they fund, and required that a borrower's comprehensive financing cost comply with Supreme People's Court rules — effectively a 24% annualized ceiling under judicial protection [21]. Qifu's own first quarter of 2026 was framed by management as delivered "against the backdrop of regulatory tightening," even as it still produced ¥3.9 billion of revenue and ¥2.1 billion of operating cash [22]. How binding the whitelist and the 24% cap actually are — and whether they compress Qifu's take rate or simply thin the field of competitors — is the most consequential open question the later chapters must resolve.

Capital return and who owns it

While the multiple collapsed, Qifu accelerated returns to shareholders. Ordinary shares outstanding fell 14% in a single year, from 284.0 million at end-2024 to 243.8 million at end-2025, and treasury stock rose to ¥4.1 billion [23]. On top of buybacks, a semi-annual dividend set at 20–30% of net income delivered US$0.78 per ADS for the second half of 2025 alone — about 5.8% of the current ADS price for a single half-year [24].

Source: FY2025 20-F, net income per share denominator [25].

Alignment sits on the other side of the ledger. Directors and executive officers together own just 1.1% of the company, and the chief executive holds 0.3%, most of it in options [26]. The largest holder is Aerovane Company Limited at 19.1%, a stake tied to the company's 360-Group heritage, followed by the investment firm Aspex Management at 5.3% [27]. For an investor who weighs insider ownership, the read is mixed: management's own money is barely in the stock, but the aggressive buyback is doing the aligning that direct ownership does not. The structure and motives behind Aerovane's block, and whether the buyback is genuine per-share value creation or balance-sheet management, are worth a chapter of their own.

The question this report answers

Qifu presents a rare split screen: a platform that in 2025 grew revenue, set a cash-flow record, shrank its share count 14%, and pays a double-digit-yielding dividend, whose equity nonetheless trades at roughly half of book and near two times earnings after a 70% fall.

The central question this report weighs is whether QFIN's de-rating reflects a durable impairment of its earning power — from China's tightening loan-facilitation rules, the credit cycle, and the standing discount on U.S.-listed Chinese platforms — or a market misjudging a business that is still compounding cash and retiring its own shares.

The strongest fact for the bears is already on the page: net income fell in 2025 while provisions rose, and consensus expects earnings to keep falling in 2026 — evidence that the earning power itself, not just its price, may be eroding. The strongest fact for the other side is that operating cash and returns to shareholders rose through the same period. Which of these two readings is correct turns on the take rate, the credit book, the regulation, and the trustworthiness of the reserves — the subjects the chapters that follow take up in turn.