The company is in a phase of steady and slow growth. In the first half of 2023, the company's total revenue was RMB 4.881 billion, up 7% year on year, and adjusted EBITDA was RMB 23.51 billion, up 11.9% year on year. The company has not adjusted its annual guidelines, and IDC's demand side is stabilizing. The estimated annual revenue is between 9940 billion and RMB 10.320 billion, the growth rate is between 6.6% and 10.6%, and the median value is about 8.5%; the adjusted annual EBITDA guideline is 4.430 billion to 46.00, with a growth rate between 4.2% and 8.2%, with a median value of about 6.2%.
Total supply continues to increase, and the pace of expansion remains cautiously slowing. According to statistics from IDC and the Academy of Information and Communications Technology, the company continues to be the number one third-party data center service provider in China. As of Q2 2023, the company had 90 total operation centers, a total computer room area of 53.12 square meters, 13 data centers under construction, a total computer room area of 197,700 square meters, a total contract area of 637,700 square meters of data centers, a total service capacity of 728,000 square meters (2022Q2:667,500 square meters), and a total contract rate of 92.4% (2022Q2:
95.9%), total utilization rate 72.1% (2022Q2:68.5%), average MSR (price per square meter per month) RMB 2170 (down 4.2% year on year, slightly up from 23Q1).
In the first half of 2023, the company added 6,945 square meters of contract area, which continued to slow down year on year.
We believe that after experiencing a period of trough, the IDC industry as a whole is currently at a stage where supply and demand are at a low level and are basically flat. The market has not shown any obvious signs of rising demand, and the intensity of the company's expansion is also tightening at the same time. The AIGC boom since this year will be one of the important drivers of demand and supply in the next stage, but it will take time for it to spread to the IDC industry, and we expect it may be around a year.
The international layout is taking shape. In the first half of 2023, the company continued its internationalization process. In Hong Kong, its own data center was put into use; in Singapore, it obtained energy targets for developing a new data center; in Malaysia, the data center in Johor officially opened, and the company became the only manufacturer with an IDC layout in Singapore, Malaysia, and Indonesia.
Investment advice. We forecast that the company's revenue for 2023-2025 will be RMB 101.18/114.34/13.149 billion yuan (unadjusted), respectively, with a CAGR of 14% for the period.
The company's adjusted EBITDA for 2023-2025 was RMB 45.27/51.21/5.917 billion yuan (unadjusted), respectively, and the CAGR was 14%. According to comparable company statistics, the average EV/EBITDA in 2023 was 15 times, and the EV/EBITDA of the two leading US IDC companies was 23 times and 20 times, respectively. Considering factors such as the company's industry position, industry supply and demand, and performance growth rate, and referring to the two US benchmark companies, we gave GDS 2023 15 times EV/EBITDA (originally 16 times), then the corresponding target market value was RMB 33.618 billion. Based on total share capital of 1,5244.3 billion yuan, then the target price was RMB 22.05 per share (corresponding to HK$23.75 per share, -17%), maintaining the “superior to market” rating.
Risk warning. Affected by the slowdown in overall industry growth, the company's data center listing rate did not meet expectations, affecting revenue growth, which in turn affected the company's EBITDA level; the company's overseas expansion had unexpected events, leading to risks such as increased costs and reduced profitability.