I actually found what i was missing about LX thinking it was a great deep value buy.
From Q4 2025 to Q2 2026, delinquency rate was increasing, 3.1 to 3.6% , their net income was greatly impacted by the provision of garuanteed liabilities basically what they owe to the funding partners if consumers were to default, they are not realized yet but they count that as part of their losses just incase.
With this particular liability staying high and delinquency rates increasing, net income is greatly affected and could impact equity growth in the near future as projected by the ceo, they are expecting a net loss in Q3 2026.
If delinquincy rates improves we might see a potential buy in and re rate, but for now there isnt a clear timeline on when the industry will recover as a whole.
Some positive side of LX is that they are moving towards a capital light model similar to Qfin, so if they manage to convert majority of their loans to this model and maintain their current revenue growth, they could standout as the winner among its peers like QFIN and FINV
Did a 2 statement financial model as their quarterly doesnt include a cashflow statement. Found out the flaws I had with my thesis but i think going forward i’ll be able to make better buy decisions with this lesson
With that said my average is $2.40 per ADS and i am also at a huge drawdown about 65-70%, but closely monitoring their quarterly earnings to see whether i should continue holding it or cut my losses
Just putting my thoughts out here, as I had a previous post which i deleted on my strong buy thesis on LX (deleted cause i thought i was important enough to be targeted by other funds but Jokes on me xd)
Share with me what you think about my current thesis and where do you think LX will go in the next 6-9months based on china current Macro economics