20220323-招银国际-万国数据-SW-09698.HK-Remains_committed_in_tier-one_cities_resources_9页_1mb

GDS (9698 HK) Summary

Core Content

GDS (9698 HK) is a leading player in the Chinese data center market, with a strong focus on tier-one cities. Despite a softer outlook for FY22E due to macroeconomic challenges, the company remains committed to its core strategy and has maintained its BUY recommendation with an updated target price of HK$50.63.

Key Financial Highlights

FY4Q21 Results

• Revenue: RMB2,187 million (+34% YoY, +6% QoQ)
• Gross Profit: RMB487 million (+13% YoY, +7% QoY)
• Gross Margin: 22.3% (+0.2 pct pts QoQ)
• Adj. EBITDA: RMB1,027 million (+36% YoY, +7% QoQ)
• Adj. EBITDA Margin: 47.0% (+0.5 pct pts YoY, +0.3 pct pts QoQ)
• Net Loss: RMB316 million (narrowed compared to previous quarter)

FY22E Guidance

• Revenue Range: RMB9,320-9,680 million (YoY growth: +19.2% to +23.8%)
• Adj. EBITDA Range: RMB4,285-4,450 million (YoY growth: +15.7% to +20.2%)
• Capex Plan: RMB12 billion (-12% YoY), allocated to organic expansion, regional expansion, M&A, and landbank acquisition
• Organic Net-Adds: 85-90k sqm (vs. 119k sqm in FY21)
• Retail to Wholesale Ratio: Expected to increase from 20% to 30%

Factors Affecting FY22E Performance

• Slower Move-In Rate: Impacting monthly service revenue (MSR)
• Lower MSR: MSR is expected to decline by mid-single digit
• Higher Power Tariff: Only 50% pass-through to customers, reducing margins
• Adj. EBITDA Margin: Expected to decline to 46% in FY22E (from 47% in FY21)

Earnings Revisions

Metric	New Estimate (FY22E)	Old Estimate (FY22E)	% Change
Sales	RMB9,432 million	RMB9,967 million	-5%
Gross Profit	RMB1,883 million	RMB2,253 million	-16%
Operating Profit	RMB534 million	RMB840 million	-36%
Adj. EBITDA	RMB4,316 million	RMB4,500 million	-4%
PBT	RMB-1,635 million	RMB-950 million	+72%
Net Profit (Loss)	RMB-2,197 million	RMB-1,314 million	+67%
EPS	RMB-1.54	RMB-0.92	+67%

Valuation

• EV/EBITDA: Lowered to 20x (from 23x) for FY22E, reflecting macro uncertainty
• Target Price: HK$50.63 (from HK$59.13)
• Valuation Comparison:
  • GDS: EV/EBITDA 20.6x (FY22E), EBITDA margin 47%
  • 21Vianet: EV/EBITDA 5.3x (FY21E), EBITDA margin 28%
  • Sinnet: EV/EBITDA 14.8x (FY21E), EBITDA margin 23%
  • Baosight: EV/EBITDA 27.2x (FY21E), EBITDA margin 19%
  • AtHub: EV/EBITDA 21.4x (FY21E), EBITDA margin 64%
  • ChinData: EV/EBITDA 14.3x (FY21E), EBITDA margin 47%
  • Equinix: EV/EBITDA 24.7x (FY21E), EBITDA margin 47%
  • Digital Realty Trust: EV/EBITDA 22.5x (FY21E), EBITDA margin 55%

Financial Summary

Income Statement (YE 31 Dec)

• Revenues: FY20A: RMB5,739M, FY21A: RMB7,819M, FY22E: RMB9,432M, FY23E: RMB11,076M, FY24E: RMB13,273M
• Gross Profit: FY20A: RMB1,550M, FY21A: RMB1,779M, FY22E: RMB1,883M, FY23E: RMB2,403M, FY24E: RMB3,663M
• Adj. EBITDA: FY20A: RMB2,681M, FY21A: RMB3,703M, FY22E: RMB4,316M, FY23E: RMB5,110M, FY24E: RMB6,213M

Cash Flow Summary

• Net Cash from Operating Activities: FY20A: RMB321M, FY21A: RMB1,208M, FY22E: RMB748M, FY23E: RMB2,267M, FY24E: RMB3,057M
• Capital Expenditures: FY20A: RMB8,021M, FY21A: RMB9,699M, FY22E: RMB11,036M, FY23E: RMB4,984M, FY24E: RMB4,984M
• Net Change in Cash: FY20A: RMB11,087M, FY21A: RMB-4,364M, FY22E: RMB-794M, FY23E: RMB-2,632M, FY24E: RMB-115M

Balance Sheet (YE 31 Dec)

• Non-current Assets: FY20A: RMB38,940M, FY21A: RMB57,169M, FY22E: RMB69,435M, FY23E: RMB73,959M, FY24E: RMB78,482M
• Current Assets: FY20A: RMB18,319M, FY21A: RMB14,464M, FY22E: RMB15,237M, FY23E: RMB13,130M, FY24E: RMB13,653M
• Total Equity: FY20A: RMB25,566M, FY21A: RMB24,533M, FY22E: RMB22,494M, FY23E: RMB20,276M, FY24E: RMB19,119M

Key Ratios

• Total Area in Service: FY20A: 334k sqm, FY21A: 488k sqm, FY22E: 585k sqm, FY23E: 691k sqm, FY24E: 801k sqm
• Average Utilization Rate (UTR): FY20A: 72%, FY21A: 67%, FY22E: 67%, FY23E: 69%, FY24E: 70%
• Average MSR (RMB/sqm/month): FY20A: 2,333, FY21A: 2,260, FY22E: 2,169, FY23E: 2,118, FY24E: 2,121
• Net Debt / Equity Ratio: FY20A: 0.7, FY21A: 1.4, FY22E: 1.8, FY23E: 2.2
• Current Ratio: FY20A: 2.4, FY21A: 1.1, FY22E: 0.9, FY23E: 0.7, FY24E: 0.6

Shareholding Structure

• STT GDC: 31.8%
• William Huang - Chairman: 5.6%
• Ping An: 2.2%

Stock Performance

• 1-Month: -17.2% (Absolute), -5.6% (Relative)
• 3-Month: -21.0% (Absolute), -14.5% (Relative)
• 6-Month: -37.3% (Absolute), -28.4% (Relative)

Key Assumptions

• Total Area in Service: FY22E: 585,460 sqm, FY23E: 690,842 sqm, FY24E: 801,377 sqm
• Total Area Utilized: FY22E: 387,828 sqm, FY23E: 475,221 sqm, FY24E: 568,233 sqm
• Average UTR: FY22E: 67%, FY23E: 69%, FY24E: 70%
• Average MSR: FY22E: RMB2,169, FY23E: RMB2,118, FY24E: RMB2,121
• Depreciation: FY22E: RMB3,480M, FY23E: RMB4,151M, FY24E: RMB4,151M

Conclusion

GDS is maintaining its commitment to tier-one cities and its pipeline for data centers is robust. Despite a slowdown in revenue and adj. EBITDA growth, the company is still optimistic about long-term cloud demand in China. The revised target price reflects the current macroeconomic uncertainty, but the company's strategic position and growth potential support the BUY recommendation.