"High dividends" resonate with "market value management", the social value behind the company's financial reports

On March 21, Lufax Holdings (LU.N; 06623.HK) released its financial report for the fourth quarter of 2023 and the express annual results for 2023, showing a steady development trend and strong growth resilience. In 2023, Lufax Holdings will achieve an operating income of about 34.3 billion yuan and a net profit of 1.034 billion yuan.

Boosted by the financial report, Lufax Holdings closed at $4.91 on March 21, up 45.7%, with a market value of $2.814 billion.

It can be seen that the self-transformation effect of Lufax Holdings has been implemented. In recent years, Lufax Holdings has done more difficult things and taken a more stable path in the turning point, and explored the high-quality development path of "high-quality quantity and excellent structure" in the spirit of self-revolution and self-cultivation, interpreting the forward-looking advantages of long-termists.

Text丨Financial Observatory Author: Qiao Xin

Boosted by the financial report, Lufax Holdings' U.S. stocks rose 45.7%

According to the financial report, in the fourth quarter of 2023, Lufax Holdings achieved revenue of 6.857 billion yuan, net profit of -832 million yuan, -806 million yuan in the same period of the previous year, and net profit attributable to shareholders of the group of -844 million yuan, compared with -815 million yuan in the same period of the previous year. In 2023, Lufax Holdings will achieve revenue of 34.255 billion yuan, net profit of 1.034 billion yuan, and net profit attributable to shareholders of the group of 887 million yuan.

In 2023, Lufax Holdings will actively fulfill its original mission of providing financial services to the real economy and serving people's livelihood, formulate targeted measures in terms of strategic promotion, resource allocation, team building, risk management, etc., continue to increase financial support for small and micro enterprises and residents' consumption, and promote the quality and efficiency of financial services.

By the end of 2023, Lufax Holdings had served about 20.94 million customers, with a balance of 315.4 billion yuan in loans and 208 billion yuan in new loans for the year. In 2023, Lufax Holdings will provide unsecured loan services to a total of 151,000 small and micro business owners, emphasizing the optimization of financing service structure and increasing targeted support for small and micro economic development areas and key industries.

Take the "hard but right" path

In recent years, in order to adapt to the complex and volatile external environment, Lufax Holdings has undergone a number of major transformations: from the world's largest P2P, to a one-stop wealth management platform, to the focus of development to small and micro credit, and to expand the licensed consumer finance business, and now it is positioned as "China's leading financial service enabling institution for small and micro business owners".

From "business layout reform" to "team reform", this is a brave self-revolution. Today, Lufax Holdings provides small and micro business owners with easy access to inclusive products and services, and empowers institutional partners to implement inclusive finance and support the real economy.

Zhao Yongzao, chairman and CEO of Lufax Holdings, said that although the new business model will put short-term pressure on the company's performance, in the long term, the move will help the company gain greater business autonomy and achieve a better balance between revenue and costs. Considering that the business model adjustment has just been completed, we will continue to adopt a prudent business strategy this year.

In 2023, Lufax Holdings will actively respond to changes in the market environment, take the pace of "high-quality volume and excellent structure", implement four major risk reduction reform measures, complete the model transformation, and lay a good foundation for the company's medium- and long-term healthy development. The four risk reduction reform measures are to adjust the market segment and strengthen the product portfolio, adjust the regional strategy of the offline service network, optimize the channel strategy and build an excellent team, support key areas and industries, and optimize the risk assessment system in a targeted manner.

Lufax Holdings completed the transition to a 100% guarantee model at the end of the third quarter of 2023, and all new loans in the fourth quarter of 2023 were issued by consumer finance subsidiaries as on-balance sheet loans, or provided by Ping An Puhui Financing Guarantee Co., Ltd. under a 100% risk-taking business model. As of the end of 2023, the leverage ratio of the guaranteed subsidiary was 1.8x, well below the upper limit of 10x. The capital adequacy ratio of consumer finance subsidiaries was 15.3%, higher than regulatory requirements. The balance of monetary funds controlled by Lufax is 39.6 billion.

It can be seen that the macro environment is complex, and new financial enterprises are under the pressure of transformation, and continue to explore high-quality development paths.

Increase shareholder rewards with a generous "special dividend" package

In the view of Lufax Holdings, by taking strong and effective measures to repay investors, it not only enhances the internal stability of the capital market, but also fully demonstrates Lufax Holdings' strong confidence in future development prospects.

According to Lufax Holdings' announcement, with a strong capital position and visibility of recent business growth, the company is able to further respond to continuous feedback from shareholders and improve shareholder returns. The Board of Directors has approved a special dividend of US$2.42 per ADS or US$1.21 per ordinary share, with an estimated total size of approximately $10 billion. The special dividend will be paid in cash to provide shareholders with full flexibility by giving them the option to receive all dividends on a scrip basis.

It is reported that a cash dividend of US$0.078 per common share (US$0.039/ADS) has been paid in the middle of 2023, with a dividend ratio of 40%.

In this regard, Zhao Yong-seoo said that the company has always attached importance to the return to investors, and has continued to pay regular dividends in the past three years. In view of the prudent development of the company's business in the short term, the low leverage ratio of each business entity, and the high surplus capital of the company, in order to continue to return investors and improve the efficiency of capital use, the board of directors has approved the payment of special dividends. To give shareholders full flexibility, each shareholder can choose to convert into shares or receive cash dividends.

With the evolution of the times, the dominance of high-dividend assets has increasingly become a long-term phenomenon, reflecting that high dividends are the near-best strategy for outperformance. From the perspective of high-dividend asset pricing in the dividend era of the United States, Japan and the United Kingdom, the important characteristics of the dividend era are: from the discovery of high dividends to the creation of high dividends, the willingness of enterprises to take the initiative to pay dividends is increased (especially the enterprises with a low growth rate of 5-10% in the start-up stage begin to enhance dividends), reflecting the high value.

A number of securities industry insiders pointed out that this move may help boost the valuation performance of Lufax Holdings, so that its stock price can return to a reasonable valuation level faster. Behind this, more and more global investment institutions regard the profit dividends and share buybacks of listed companies as an important basis for evaluating the long-term investment value of listed companies. Lufax Holdings' generous "special dividend" package will help global capital regain its bullishness on the investment potential and allocation value of Chinese companies.