市場資訊

We expect 1H22 earnings to fall 20%
We expect Linklogis’ 1H22 revenue to fall 4% YoY to Rmb508mn, and adjusted net profit to decline 20% YoY to Rmb122mn. We attribute the YoY falls to the drag from asset securitization business in 1H22. Trends to watch
Transaction value: We estimate that 1H22 overall transaction value may grow 14% YoY to Rmb115.7bn.
Asset securitization business (ASM cloud and ABS cloud): We estimate that transaction value of asset securitization business will decline 1% YoY to Rmb51.5bn, with AMS cloud up 5% to Rmb35.1bn and ABS cloud down 11% to Rmb16.4bn. We think the transaction value declined, as work suspension during COVID-19 conditions affected core suppliers to the real estate sector (such as construction, landscaping and decoration), and sector supply-chain financing environment tightened.
Direct financing (multi-tier transfer cloud and eChain cloud): We estimate that transaction value of direct financing business will grow 28% YoY to Rmb58.9bn. 1) We estimate that transaction value of multi-tier transfer cloud may rise 52% YoY to Rmb26.2bn thanks to rising number of clients and improving client stickiness and willingness to pay for this type of service driven by expanding product portfolio. 2) We estimate that transaction value of eChain Cloud may rise 13% YoY to Rmb32.7bn, slower than multi-tier transfer cloud as COVID-19 conditions dampened financial institutions’ interest in expanding supply-chain financial business.
We foresee gradual recovery in 2H22.
Emerging solutions (cross-border cloud and SME credit tech solutions): We estimate that transaction value of emerging solutions may rise 39% YoY to Rmb5.4bn. 1) We estimate that 1H22 transaction value of cross-border cloud may grow 60% YoY to Rmb4.7bn. We expect the business to maintain rapid growth, as the firm is a domestic frontrunner in providing cross-border supply-chain solutions and does not have many major competitors. In addition, the firm has taken the lead in cooperating with established overseas providers of supply chain management services.
We think that Linklogis may further strengthen cooperation with core overseas firms, and provide Chinese suppliers with one-stop solutions for their supply chains covering foreign exchange settlement, custom declaration and financing etc. 2) We estimate the transaction value of small and medium enterprise credit tech solutions will decline 25% YoY to Rmb0.7bn, as the firm plans to gradually exit credit lending business.
Major financials: Revenue, gross profit and adjusted net profit.
Revenue: We expect 1H22 revenue to fall 4% YoY to Rmb508mn, due to rising client concentration rate for asset securitization business and direct financing business, and YoY declines in comprehensive service fee rates for large clients given their high transaction value.
Gross profit: We expect 1H22 gross profit to drop 1% YoY to Rmb403mn, and gross margin to rise 2.0ppt YoY to 79.3% thanks to optimization in product structure and rising contribution from high-margin businesses such as non-standard asset securitization business and multi-tier transfer cloud business.
Adjusted net profit: We expect 1H22 adjusted net profit to decline 20% YoY to Rmb122mn with adjusted net margin of 24.0% (vs. 28.9% in 1H21).
We foresee HoH growth driven by better expense control.
Financials and valuation We lower 2022-2023 revenue forecast 16% and 16% to Rmb1.26bn and Rmb1.61bn, given slowing transaction value growth for asset securitization business in 1H22, and mild YoY declines in service fee rates for ABS cloud and multi-tier transfer cloud. We cut 2022-2023 forecast adjusted net profit 21% and 20% to Rmb306mn and Rmb452mn, considering that: 1) gross margin may increase in 2H22 along with rising transaction value contribution from high-margin non-standard asset securitization business and multi-tier transfer cloud; 2) the firm is still expanding business, and the boost from expense control measures has yet to fully materialize. The stock is trading at 34x and 23x 2022-2023e P/E.
Given systemic declines in sector valuations, we cut TP 37% to HK$7.56 (50x and 32x 2022-2023e P/E with 45% upside). Maintain OUTPERFORM.
Risks
Uncertain regulatory environment; high client concentration; risks related to emerging solutions and bridge loans.