Who the next Ant Group's Competitor is?

NYSE: LU
LISTED ON 30 OCT 2020

L U FA X H O L D I N G ( N Y S E : L U ) , O N E O F T H E L A R G E S T F I N T E C H S I N C H I N A A N D A
C O M P E T I T O R T O A L I B A B A' S A N T G R O U P, B E G A N T R A D I N G O N T H E N E W Y O R K S T O C K
E X C H A N G E O N O C T. 3 0 A F T E R R A I S I N G $ 2 . 3 6 B I L L I O N I N O N E O F 2 0 2 0 ' S B I G G E S T I P O S .
Company Information

• Lufax Holding Ltd 陆金所 one of the

largest Chinese FinTech companies,
with a valuation of US$46.86BN, a
disruptive online Internet finance
marketplace.
• Founded in 2011, Lufax has the
backing of Ping An Insurance Group
Post-IPO, Ping An owns almost 39% of
Lufax.
• Ranked among Top 10 in
KPMG’s Global Fintech 100 list for 5
years in a row.
• China’s largest non-SOE financial
institution, ranked 21th in the Fortune
Global 500 list and seventh in the
 93.3% retention
rate among wealth ranking number 2 *

management
customers in 2019

Ranking number 3 *
 China (2nd largest fin system
globally)*

Retail Credit Total personal investable assets

Lending reached increase US$27 trillion in 5 years
US$7.9Trillion 2019 time with CAGR12% from 2014*
(5 years CAGR15.9%
from 2014)*
Expected to reach RMB319 trillion in
2024 (5 years CAGR11% from 2019)*
*as estimated in the Oliver Wyman Report.
 • $USD11
2019 GDP trillion

Growth Driver CAGR 5%

• Contribute
1. GROWING China economy  significant investment & 80% of GDP

consumption.
2024 • $USD14.4
trillion
GDP (projection)

2. Increase in small & medium business.

74% increase 80%
=60% GDP
(from 2014 to employment
contributor
2019) provider in 2019

3. Rise of middle class and affluent population with investable

assets. (Projection: CAGR 6.1% to 8.1% from 2014 to 2019)
 Market Opportunities
• Demand for small business financing in China was
RMB89.7 trillion (US$12.7 trillion) in 2019, of which 48% 26%
RMB46.6 trillion (US$6.6 trillion) was unmet (52%)

• China’s personal investable assets reached RMB192

trillion (US$27 trillion), making it the second largest
52% 74%
personal wealth management market globally, and only
RMB49 trillion (US$7 trillion) or 26% has been placed in
wealth management products. (means 74% SMALL PERSONAL
opportunity) BUSINESS INVESTABLE
DEMAND ASSETS
Why there is such big unmet demand? Idle
investment fund?
• Underserved by traditional financial
institutions & online-only FinTech
platforms
• Traditional financial institutions do
not have the necessary skills, data and
technology to fully address these
customer needs. (Troublesome, huge
documentation, need to present at
institution, not convenient)
• online-only Fintech platforms backed
by major internet companies, such as
Ant Financial, WeBank and Tencent
Licaitong, generally lack the financial
data and financial services capability
to price credit risk appropriately for
borrowers and provide suitable
 Tailored to individual customers’
Unique Business Model: Technology- needs and risk appetites by
empowered Personal Financial Services
Connected 13.4mil wealthy
borrowers with properties/fin
accumulates users’ data to drive
ongoing personalization of services
assets with >50“Hub &
banks with Spoke” Platform
affordable large-ticket funding. Proven technology
applications + easy access to
Ping An Group’s 8 research
institutes and more than
21,000 patents and patent
applications.

Access to Ping An Group’s

approximately 210 million
financial services customers, a
proportion of which are HIGH
QUALITY small business
owners and middle class and
affluent investors.

superior online customer experience/telemarketing + large

Through-the-cycle track record
direct salesforce of over 56,000 agents and online -total wealth management client assets, excluding legacy products, grew
telemarketing team of over 4,000 personnel + in house 9,500 at a CAGR of 39.4%total balance of loans facilitated grew at a CAGR of
collection teams +cooperation with >50 funding partners 26.6%
How does Lufax makes money?
“Asset light” model
 Future prospects of Lufax
Delinquency Rates CAGR(2014 to 2019)

1%
LUFAX
27%

2%
Industry
14%

0% 5% 10% 15% 20% 25% 30%

 According to its IPO prospectus, these credit facility & personal wealth management could grow at
a double-digit compound annual growth rate (CAGR) between 2019 and 2024. 
 CEO
• Gregory Dean Gibb is 53 yo, with 4.6 yrs tenure.
• marketing assistant in Merrill Lynch International,
director positions at McKinsey & Company,  COO of
Taishin Financial Holding Co., Ltd, Ping An Insurance
(Group) Company of China and served as the chief
innovation officer.
• Widely-recognized for his unique insights on innovative
financial services, Gregory Gibb was introduced to the
“National 1000-Foreign-Expert Plan” by the
Organization
LEADERSHIP TEAM Department of the CPC Central
Committee in 2012. Gregory Gibbs was also awarded the
“Shanghai Top 10 Financial Innovation Figures of 2012”,
as well as honored in the “China Top 10 Leaders of
Internet Finance of 2013.”
• Gregory Gibb is also the author of “Banking in Asia - The
End of Entitlement” (Wiley, 1999) and of “Banking in
Asia - Acquiring a Profit Mindset” (Wiley, 2003). Both
books have introduced bankers to new development
opportunities, and trump cards in Asia.
 • Tongjun • Lanbang
Investment Investment
Company Limited Company Limited
(high rank of Ping
An management)

Tun Kung Company Limited

. 39.38% Shares 41% 37.4%
CEO: X-Ping An
Insurance CIO

LUFAX
HOLDING
Ping An of China Asset
Management (HK) Co Ltd Ping An Insurance (Group)
15.58% Co of China Ltd
23.38% Shares
MOET
• NETWORK EFFECT

• value of the service increases as more

people uses its AI technology.
• with Ping An’s eco system, the numbers
of potential connections in a network
grows exponentially.
• EFFICIENT SCALE

• Require a strong support from

banks/government, massive database,
and good relationship and reputation
with fund provider & earn trust from
customers. This make the new entrants
may not have an incentive to enter the
industry.
 Get a copy of below ‘secret
weapon’ mentioned by CTO

Lufax CTO Mao Jinliang statement.pdf

Covered Areas:
Hospital
Food
Home
Transportation
Travelling
RISKS
• China's regulatory environment may
disrupt the growth of online lending
companies, hurting its prospects. Latest
case example: Banks feel disrupted by
ANT group and mean while, Lufax has
caused no significant disruption to any
SSE-listed bank. *
• Fierce competition from popular online
finance platforms backed by the likes of
Ant Group and Tencent Holdings where
the numbers of registered users are
more than Lufax.
• Key Man risk, where Lufax is leverage
and highly dependent on Ping An
ecosystem.
• *Refer next slide
 Competitors
L UFAX
• total retail credit balance of Lufax
was 519 billion yuan.
• 44.7 million registered users
• Join corporation with banks,
investors and asset management
firms.
• Act like a middle man to connect the
investors funds to borrowers.
• Online + offline approach
• Technology AI + robust Financial
services
• Stronger support from
banks/government (better
relationship)
A NT F I NAN CI AL
• personal credit business has
facilitated a total credit of 2.1 trillion
yuan.
• 1.07 billion registered users
• Bank are found to be disrupted by
Ant.
• Government come out new rules:
Anti-monopoly rules
• operate with a much lower
transparency as compared with listed
banks.
• Alipay business draw many more
potential customers by nature
Source: https://techcrunch.com/2020/11/09/tencent-vs-alibaba-ant-fintech/
T EN CE NT ( WE IL ID AI)
• personal credit business has
facilitated a total credit of 3.7 trillion
yuan.
• 1.2 billion registered users
• Government come out new rules:
Anti-monopoly rules
• operate with a much lower
transparency as compared with
listed banks.
• Wechat business draw many more
potential customers by nature
Method of investigation by banks on influence of
Lufax & Ant. The exchange putting ANT listing on
hold.

Research done by banks on

Want to take
influential investigation &
a peek?
MITBfinalpaper20190420.pdf valuation methods
FINANCIAL STATEMENT
The Gross Profit Margin
% is super high, which
means the cost of
revenue is extremely
120.00% low.

100.90% 100.10% 99.51%

100.00%
92.50%

80.00%
0.76
0.73
0.7

60.00%

41.94%
40.00%
0.33 30.99%
28.93%
24.33%
20.00%

0.00%
FY17 FY18 FY19 LTM20 Q2

Gross Profit Margin Operating Margin Net Profit Margin (Adj.)

 YoY
Cash From Operations
FY17
2675
grow
FY18
-1452
Cash
FY19
2192
Flow
LTM20 Q2
4719
CAPEX -469.2 -269.9 -181.7 -113.8 6000 12

Free Cash Flow (FCF) 2205 -1722 2010 4605

5000
10
4000

3000 8

2000
6
1000

0 4
FY17 FY18 FY19 LTM20 Q2

-1000
2
-2000

-3000 0

Cash From Operations CAPEX Free Cash Flow (FCF)

 Drop in 2018?
Cash Flow from
operating income is
down in 2018, mainly
due to higher
repayment to accounts
& other payables and
lower cash receive from
accounts & other
Drop in 2018? receivables.

Cash Flow from operating income is down in 2018, mainly

due to higher repayment to accounts & other payables
and lower cash receive from accounts & other Profits after adjustment
receivables.
for 2018 is higher than
Profits after adjustment for 2018 is higher than 2017.
2017. Therefore,
Therefore, business profit is improving YoY. business profit is
improving YoY.
DEBT/EQUITY 0.5X MARKET
MEASUREMENT (SLIGHTLY
OVER)
Good Debt Management
GROWING CASH RATIO VS
MARKET MEASUREMENT
>2X BEST, >1X GOOD

TREMENDOUS GROW IN
CURRENT RATIO VS MARKET
MEASUREMENT >1X BEST,
>0.5X GOOD

Bravo
VALUATION
 Average Price/Earnings Ratio
Price/Earnings to Growth and Dividend Yield (PEGY Ratio)

Diluted EPS (Adj): 0.733 Average PE: 23.74

Assume Growth rate:30%

Diluted EPS (Adj): 0.733
No Dividend payment

Valuation:$21.99 Valuation:$17.40
Market Price@20.11.20 =$15.72
 Please do your own due diligence.
This is not for buy or sell recommendation
But for education purpose.