The first quarter results were broadly in line with expectations and maintained steady growth, with no change in guidance for the whole year. In the first quarter of 2024, the company achieved revenue of about 2,627 billion yuan (RMB, same below), an increase of 9.1% year on year; adjusted EBITDA was 1,183 billion yuan, up 4.7% year on year, about 25.5% of our forecast for the 2024 fiscal year (RMB 4.648 billion), which is roughly in line with expectations. The company remains unchanged in its annual performance guidelines. The annual revenue is expected to be between RMB 11.34 billion and RMB 11.76 billion, with a year-on-year growth rate of 13.9-18.1%; the adjusted EBITDA is expected to be between RMB 4.950 billion and RMB 5.150 billion, with a year-on-year growth rate of 7.0-11.4%.

The scale of the business has been growing steadily, and the pace of expansion has slowed. By the end of the first quarter, the company's operating area was 583,229 square meters, up 1.9% from the previous quarter, and the contract rate was 92.5%, the same as the previous quarter; the area under construction was 172,537 square meters, a decrease of 12.4% year on year, and the pre-contract rate was the same; and the usage area was 436,875 square meters, up 4.3% month on month. In the first quarter of 2024, the company's new usage area reached a three-year high of 36,891 square meters, mainly including the additional usage area of 17,072 square meters of the Langfang data center in China, and the additional usage area of 18,127 square meters of the NTP2 and NTP3 international data centers in Johor, Malaysia.

International business continues to advance, and financial support is sufficient. The company's international business has expanded to the three major global data center markets centered around Singapore-Johor-Batam: Southeast Asia, Hong Kong, China, and Japan. By the end of the first quarter, the company's international business had received a pre-order capacity of 182 MW, of which approximately 40% came from leading global customers. Furthermore, on May 13, 2024, the company announced revisions to the Series A convertible preferred share subscription agreement signed between DigitalLand Holdings Limited, a wholly-owned subsidiary responsible for the assets and operations of international data centers, and a number of institutional private equity investors, increasing the issuance scale from US$587 million to US$672 million. The equity financing will provide sufficient financial support for the continued expansion of the company's international business.

The purchase rating is maintained, and the target price is $11.28. We forecast the company's revenue for 2024-26 to be 113.57/128.69/14.243 billion yuan, with a CAGR of 12% for the period, and the adjusted EBITDA of the company in 2024-26 of 46.48/51.25/5.758 billion yuan, respectively, and 11% CAGR. Considering the company's expansion potential in overseas markets, the first quarter results were generally in line with expectations. We still gave an EV/EBITDA of 8.2 times, corresponding to a target price of HK$11.28, maintaining the purchase rating.

Risk warning: 1) The data center launch rate falls short of expectations due to the slowdown in industry growth; 2) construction of new data centers is slower than expected; 3) Unexpected cost increases; 4) Customer behavior patterns have changed.