Yirendai Ltd – ADR (NYSE:YRD): Torch Bearer for the Chinese Fintech Industry

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The Yirendai Ltd – ADR (NYSE:YRD) jumped over 18% yesterday on significant volume of 2.79 million shares.

Languishing inside the band of $20 – $24 since the beginning of September, YRD finally broke out in style.

If the ADR continues on its bullish path, it will lend credence to the view that the recent decline from a high of $42.34 to a low of $20.10 was an overdue but significant (47.47%) correction.

That correction was precipitated by China’s more rigorous regulation of the peer-to-peer lending sector in recent months.  Such financing outfits are now banned from accepting retail deposits and selling financial products, and subject to stricter limits on outstanding loans.

Another trigger for the decline was a spate of class action lawsuits against the company alleging that it failed to disclose risks to its shareholders.

Yirendai Ltd – ADR (NYSE:YRD) may have discounted the regulatory headwinds

The selloff may have been overdone.

Yirendai, which is China’s only listed p2p lender, an industry pioneer and the only such lender to be listed in the US, may now offer value.

The company is owned by Chinese outfit CreditEase, which describes itself as a specialist in in small business and consumer lending as well as wealth management for high net worth and mass affluent investors.

Last month Yirendai announced strong numbers for Q2. Loans originated grew 118% year on year, while net revenue of $110 million surged 140% year on year. It also asserted that it had contained a loan scam to an amount of RMB 72 million.

Analysts at Needham reiterated in August their Buy rating on YRD, but boosted their price target from $14 to $35.

Yirendai announced yesterday that it had been elected as one of the inaugural member companies of the Internet Financial Industry Information Sharing Platform (IFIISP) on September 9 in Beijing.

The P2P lending sector in China may now be in for a shakeup and consolidation, with Yirendai poised to take advantage.

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