Answer
1. What the 15.6 % QoQ revenue jump means in plain‑numbers
| Item (Q2 2025) | Q1 2025 | Q2 2024 (YoY) | %Δ QoQ | %Δ YoY |
|---|---|---|---|---|
| Revenue (RMB) | ≈ 3.09 bn | ≈ 1.61 bn | +15.6 % | +123 % |
| Non‑GAAP EBIT (RMB) | ≈ 0.58 bn | ≈ 0.31 bn | +15.2 % | +116.4 % |
| EBIT margin | ≈ 18.8 % | ≈ 19.3 % | – (margin slightly tightens) |
The quarter‑over‑quarter revenue increase adds roughly *RMB 0.5 bn** of new sales, while EBIT adds RMB 0.09 bn of operating profit.*
2. Why the revenue growth matters for valuation multiples
| Multiple | How it is calculated | What drives it | Effect of a 15.6 % QoQ revenue rise |
|---|---|---|---|
| EV/Revenue (Enterprise‑value ÷ Revenue) | EV ÷ (RMB 3.59 bn) | Primarily reflects top‑line growth expectations | EV/Rev will tend to **compress (i.e., fall) if the market price does not rise as fast as revenue. A 15 % sales boost with a modest price change would lower the multiple, signalling a “cheaper” price relative to sales.** |
| EV/EBIT (or EV/EBITDA) | EV ÷ (RMB 670 m) | Reflects profitability and cash‑generation | Because EBIT grew 15.2 % QoQ, the denominator expands almost as fast as revenue. If the market capitalisation (or EV) rises less than the EBIT increase, the EV/EBIT multiple will compress as well. If the market rewards the higher profit growth with a larger price jump, the multiple could stay flat or even expand. |
| P/E (price ÷ earnings) – using the same Non‑GAAP EBIT as a proxy for earnings | (Market cap ÷ Net‑income) | Captures earnings‑growth expectations | The 15 % profit rise pushes earnings higher, so unless the share price accelerates proportionally, the P/E will compress. A sustained profit‑growth streak (5 straight quarters) often leads investors to price‑in a higher P/E, especially for a “new‑consumption” leader with expanding margins. |
| Price/Sales (P/S) – market cap ÷ revenue | Market cap ÷ (RMB 3.59 bn) | Directly ties market value to top‑line size | Same mechanics as EV/Rev: a strong sales boost with a modest market‑cap rise compresses the P/S. If the market perceives the sales as high‑quality, recurring, and scenario‑driven, the P/S may expand as investors assign a premium to growth. |
Bottom line: The 15.6 % QoQ revenue increase, together with a comparable profit surge, creates a dual pressure on multiples. If the market’s price reaction is muted, multiples will compress (i.e., become cheaper). If the market rewards the growth narrative—scenario‑based transactions, consumption‑spurring initiatives, and the “fifth straight quarter of profit growth”— multiples can expand or at least hold steady.
3. How the growth narrative reshapes the “multiple story” for Lexin
| Factor | Impact on Multiple | Reasoning |
|---|---|---|
| Sustained sequential profit growth (5 quarters) | Potential multiple expansion | Repeated profit‑growth signals durability, prompting investors to apply a higher earnings multiple (P/E, EV/EBIT) versus peers. |
| Scenario‑based transactions & consumption‑boosting platform | Higher EV/Revenue multiple | The “scenario‑based” model suggests higher gross‑margin upside and sticky, repeat‑purchase behavior. Markets often price such “future‑revenue‑visibility” at a premium. |
| Margin trajectory (EBIT margin slightly tightening) | Moderate compression | A modest dip from ~19.3 % to 18.8 % indicates the profit‑growth is still revenue‑driven rather than purely margin‑driven, which can keep EV/EBIT from expanding dramatically. |
| Industry comparables (Chinese digital‑consumer tech) | Relative multiple positioning | If peers are trading at EV/Rev ≈ 8‑10× and EV/EBIT ≈ 12‑15×, Lexin’s current multiples (based on the latest market cap) will be re‑priced upward if the market believes its growth rate will out‑pace the sector. |
| Macro environment (China’s consumption recovery) | Multiple volatility | A positive macro backdrop can inflate multiples across the sector; a slowdown would compress them. Lexin’s growth is tied to that recovery, so multiples are sensitive to macro data. |
4. Quantitative “what‑if” illustration
Assume the following pre‑announcement market data (typical for a fast‑growing Chinese tech firm):
| Metric | Pre‑Q2 2025 | Post‑Q2 2025 (if price unchanged) |
|---|---|---|
| Market cap (USD) | US$ 4.2 bn | US$ 4.2 bn |
| Enterprise value (EV) | US$ 4.5 bn | US$ 4.5 bn |
| EV/Revenue | 4.5 bn ÷ RMB 3.09 bn ≈ 1.5× | 4.5 bn ÷ RMB 3.59 bn ≈ 1.3× |
| EV/EBIT | 4.5 bn ÷ RMB 0.58 bn ≈ 7.8× | 4.5 bn ÷ RMB 0.67 bn ≈ 6.7× |
| P/E (using EBIT as earnings proxy) | 4.2 bn ÷ RMB 0.58 bn ≈ 72× | 4.2 bn ÷ RMB 0.67 bn ≈ 58× |
Interpretation – If the market price does not move after the results, the EV/Rev, EV/EBIT and P/E multiples all compress (become cheaper).
If the market re‑prices the stock to reflect the stronger growth, say the market cap rises to US$ 5.0 bn (≈ 19 % price jump):
| Metric | New valuation |
|---|---|
| EV/Revenue | 5.0 bn ÷ RMB 3.59 bn ≈ 1.4× (still a modest compression vs 1.5× pre‑Q2) |
| EV/EBIT | 5.0 bn ÷ RMB 0.67 bn ≈ 7.5× (back to pre‑Q2 level) |
| P/E | 5.0 bn ÷ RMB 0.67 bn ≈ 74× (slightly higher than pre‑Q2) |
Thus, a ~19 % price reaction would neutralise the compression on EV/EBIT and lift the P/E back to or above its prior level, signalling a multiple expansion driven by the market’s confidence in continued profit acceleration.
5. Take‑aways for Investors & Analysts
| Take‑away | Why it matters |
|---|---|
| Revenue growth alone does not guarantee multiple expansion | The 15.6 % QoQ rise adds sales, but unless the market price rises proportionally, EV/Rev will compress. |
| Profit growth is the key driver of multiple dynamics | EBIT grew 15.2 % QoQ, so EV/EBIT and P/E are more sensitive to how the market values the higher earnings. |
| Growth narrative (scenario‑based consumption, 5‑quarter profit streak) can offset compression | A credible story of durable, high‑margin consumption can lead investors to price‑in a premium, expanding multiples despite the arithmetic compression. |
| Margin stability matters | Slight EBIT‑margin softening suggests the profit boost is still largely revenue‑driven; a clear margin‑improvement trend would support a stronger multiple expansion. |
| Peer‑relative benchmarking is essential | Compare Lexin’s EV/Rev and EV/EBIT to peers (e.g., JD.com, Pinduoduo, Meituan) to gauge whether the market is already rewarding its growth or still has room to re‑price. |
| Macro‑sensitivity | The multiples are vulnerable to Chinese consumer‑spending data and policy signals; a slowdown could quickly compress the premium earned from the 15.6 % growth. |
6. Bottom‑line answer to the question
The 15.6 % QoQ revenue growth will initially compress Lexin’s valuation multiples (EV/Revenue, EV/EBIT, P/E) if the market price does not rise in line with the sales surge. However, because the same quarter also delivered a 15.2 % profit increase and marks the fifth consecutive quarter of profit growth—backed by scenario‑based transactions that are expected to deepen consumption— investors may **re‑price the stock upward, offsetting the arithmetic compression and potentially expanding the earnings‑related multiples (EV/EBIT, P/E) while keeping the sales‑multiple (EV/Rev) modestly lower. The net effect will hinge on how strongly the market believes the growth is sustainable, margin‑improving, and tied to a high‑quality consumption platform.**
In practice, unless Lexin’s share price jumps by roughly 15‑20 % to match the revenue and profit acceleration, the immediate mechanical outcome will be a modest compression of its valuation multiples. A credible, market‑wide belief that the growth trajectory will continue (or accelerate) will then translate that compression into a multiple expansion over the medium term.