Overview
Uxin (NASDAQ:UXIN) has finally completed the series of divestments it needs to be an asset-light and faster-growing company. The shares are currently down +50% from its YTD-high, primarily due to the COVID-19 lockdown in China. Given the attractive price, we believe that there is an upside opportunity due to some various catalysts around the stock at present. As a result, we maintain our bullish stance on Uxin.
Catalyst
In summary, Uxin builds an end-to-end online platform for used car trading. It used to operate across two segments, 2B and 2C. 2B (business) allows used car dealers to trade, while 2C (customer) provides the same feature for the consumers. It also had a financing service (loan facilitation) where it helped both businesses and consumers to finance the transactions. The company generates revenues by charging fees on each completed transaction.
The company spent much of 2019 on business restructuring which involved a series of divestments. Back in December when we covered the stock the first time, it was in the process of divesting its loan facilitation services, which we viewed positively. As it finally completed the whole restructuring process of its 2B business unit as well, we see a few catalysts that will potentially drive an outperformance:
- Uxin is now an asset-light business with low credit risk exposure, given that it already divested both its 2B unit to 58.com (WUBA) and its loan facilitation service business to Golden Pacers. At only RMB 121 million, the lease receivables are now only third as much as that of 2 years ago.
- Considering the business stopped its operations in February and March following the lockdown in China, the reopening will get the business back up and accelerate in the second half.
- Looking at the strong progress in 2019, there are plenty of upside opportunities post-restructuring. In
