Qifu Technology: Regulatory headwinds drive earnings reset, downgrade to Neutral

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Qifu Technology: Regulatory headwinds drive earnings reset, downgrade to Neutral

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Qifu Technology

Regulatory headwinds drive earnings reset,

downgrade to Neutral

Rating Change: NEUTRAL | PO: 13.80 USD | Price: 12.36 USD

Downgrade to Neutral: Risk-reward now balanced 22 May 2026

We downgrade QFIN from Buy to Neutral. While valuation appears depressed (3.2x

12mth forward P/E) and the dividend yield (~13%) remains attractive, in our view the Equity

prolonged regulatory headwinds and absence of buybacks leave the stock without a clear

catalyst for re-rating in the near term. We cut our POs by 68% to USD13.80/HKD53.81, Key Changes

as we reduce our 2026-27 EPS estimates by 57%/55% (Exhibit 8), lower target P/E

multiple from 5.5x to 3.5x (reflecting regulatory headwinds) and roll forward our (CNY) Previous Current

valuation base from 2025-26E to 2026-27E. Inv. Opinion C-1-7 C-2-7

Inv. Rating BUY NEUTRAL

Regulatory tightening: pressure on growth & profitability Price Obj. US$42.58 US$13.80

Since 2025, a series of regulatory measures - including caps on comprehensive financing 2026E EPS 59.25 25.65

costs, enhanced disclosure requirements, and tighter controls on online marketing - have 2027E EPS 62.24 27.95

constrained FinTech lenders’ addressable market, compressed loan pricing, and 2028E EPS NA 28.68

heightened credit risk. Against this backdrop, QFIN has experienced a meaningful

deterioration in operating performance, with weaker loan volumes, lower pricing, and Emma Xu >>

higher credit risk driving a sharp decline in revenue and earnings. We expect regulatory ResearchMerrill LynchAnalyst(Hong Kong)

headwinds to persist through 2026, and potentially into 2027, resulting in a structural +852 3508 8165

emma.xu@bofa.com