7 Cheap Chinese Penny Stocks to Buy According to Hedge Funds

03. Lufax Holding Ltd (NYSE:LU)

Number of Hedge Fund Holders: 11

Lufax Holding Ltd (NYSE:LU) operates a technology-driven personal financial services platform, offering personal lending and wealth management solutions. Founded in August 2005 and headquartered in Shanghai, China, Lufax Holding Ltd (NYSE:LU) is well-positioned to capitalize on its robust financial foundation and attractive dividend yields. Lufax Holding Ltd (NYSE:LU) remains an appealing investment due to its strong fundamentals and promising outlook.

The company’s recent Q1 2024 results highlight positive trends in its loan-related metrics, signaling an inflection point in new loan volume growth, with a +2% increase quarter-over-quarter after seven consecutive quarters of contraction. This growth reflects Lufax Holding Ltd (NYSE:LU) strategic shift toward higher-quality assets, supported by a favorable loan mix that increasingly focuses on consumer finance. The share of consumer loans in Lufax Holding Ltd (NYSE:LU) total new loans has surged from 24% to 42% year-over-year, demonstrating the company’s successful diversification away from its core small business owner segment.

Moreover, Lufax Holding Ltd (NYSE:LU) rising take rate, which improved from 7.3% in Q4 2023 to 9.0% in Q1 2024, underscores the company’s ability to generate higher returns from its loan portfolio. This is bolstered by the company’s “100% guarantee model,” which commands a significantly higher take rate of around 14%. As this model gains a larger share of the loan portfolio, Lufax Holding Ltd (NYSE:LU) overall take rate is expected to continue rising, further enhancing its profitability. Lufax’s dividend outlook is equally compelling, with projected forward yields of 8.2% and 8.7% for FY 2025 and FY 2026, respectively. These conservative estimates suggest that the company’s actual dividend distributions could exceed expectations, especially if Lufax leans towards the higher end of its 20%-40% payout guidance. Despite short-term challenges like withholding tax impacts from a special dividend, Lufax is poised for solid revenue growth and healthy margins in the coming years.

Trading at a consensus forward FY 2025 P/E ratio of just 3.3x, Lufax Holding Ltd (NYSE:LU) offers substantial upside potential as its valuation could re-rate higher, given its strong dividends and improving financial metrics. This makes Lufax a compelling Buy for investors seeking value and income in the personal financial services sector. In the second quarter of 2024, there were 11 hedge funds holding positions in Lufax Holding Ltd (NYSE:LU), as compared to 17 in the previous quarter according to Insider Monkey’s database. The total value of these holdings is approximately $34.38 million. Christopher Wang’s Yunqi Capital held the largest stake among these hedge funds during this period.