Can Qifu Technology's AI-Plus Credit Strategy Fuel Future Growth?

Qifu Technology (QFIN) is deploying its AI-Plus credit strategy, integrating AI agents into credit processes, risk management, and operations. This initiative has led to a 15.8% year-over-year increase in loan volume, a 30-bps decrease in funding costs, and a 41% surge in new borrowers during Q1 2025. QFIN's stock has significantly outperformed the industry, rising 115.9% in the past year, and trades at a forward P/E of 5.58, lower than its peers.

Analysis

Qifu Technology (QFIN) is demonstrating significant progress with its AI-Plus credit strategy, launched in early 2025, which integrates AI agents across core credit processes, risk management, and operations. The company deployed an internal AI agent platform in April and five digital employees by May, alongside the AI agent "ChatBI" for real-time insights. Notably, a pilot LLM-backed framework improved risk tiering, reflected by an Area Under Curve of 0.64, and its user profiling agent achieved over 95% accuracy. These technological advancements have translated into strong Q1 2025 financial results: loan volume increased 15.8% year-over-year, funding costs declined by 30 basis points, and new borrower acquisition surged by 41%. Asset quality remains robust, with the C2M2 delinquency rate stable at 0.6%, and Asset-Backed Securities issuance grew 25% year-over-year. QFIN's stock has appreciated 115.9% in the past year, substantially outperforming the industry's 50.9% gain and peers Parsons (PSN) and Jamf (JAMF), which saw declines. Despite this strong performance, QFIN trades at an attractive forward price-to-earnings ratio of 5.58, considerably lower than the industry average of 24.34 and its peers. The Zacks Consensus Estimate for QFIN’s 2025 earnings has also risen 2.3% in the last 30 days, supporting a positive outlook.

Key Decisions for Investors

• Investors should consider QFIN's demonstrated ability to leverage AI for tangible improvements in loan growth, operational efficiency, and risk management, which appear to be key drivers for future performance.
• The current valuation, with a forward P/E of 5.58, presents a potentially attractive entry point, especially when compared to its significant stock outperformance and higher peer valuations, suggesting the market may not have fully priced in its AI-driven growth.
• Given the positive earnings estimate revisions, strong Q1 2025 metrics, and a Zacks Rank #2 (Buy), maintaining or initiating a bullish stance on QFIN could be warranted, while monitoring the continued execution of its AI-Plus strategy and delinquency rates.