1H24 Steady growth in performance, positive long-term development trend

1H24's revenue was 3.917 billion yuan (YoY: 3.10%); net profit to mother was 0.268 billion yuan (YOY: 5.80%). Looking at a single quarter, 2Q24's revenue was 1.939 billion yuan (YoY:

1%); Net profit to mother was 0.104 billion yuan (YOY: 30.52%). As the IDC industry's supply and demand pattern improved, the company's net profit gradually resumed growth. The company continues to consolidate data center resource reserves in the core region and is expected to benefit from the development of new applications such as AIGC. Referring to the company's subsequent data center construction and delivery plan, we expect the company's 24-26 EBITDA to be 1.696/1.932/2.18 billion yuan. According to comparable company WIND's consensus estimate of 11.51 times the EV/EBITDA in 2024, it was given 11.51 times the EV/EBITDA for 24 years, corresponding to a target price of 11.12 yuan, maintaining the “gain” rating.

IDC's revenue remained steady, actively promoting data center construction and delivery of 1H24 company IDC and its value-added service business to achieve revenue of 1.094 billion yuan, an increase of 0.90% over the previous year. The company's data center business in seven cities including Beijing and Tianjin progressed smoothly and actively promoted data center construction and delivery progress in various regions. The company expects the Shanghai Jiading Phase II project to be delivered within the year, and the Tianjin Baodi project will be delivered as soon as the first half of 2025. Furthermore, the scale of the company's computing power business has exceeded 2000P. In terms of cloud computing, 1H24's cloud computing business achieved revenue of 2.784 billion yuan, an increase of 4.16% over the previous year. The company has been operating Amazon Web Services for nearly 8 years, and has now implemented nearly 500 new functions or services. Affected by factors such as increased market competition, Musuang Technology's main business revenue declined slightly in the first half of 2024, a decrease of 4.85% over the previous year.

Profitability remains stable and expenses are well controlled

1H24's net interest rate to mother was 6.83%, up 0.17pct year on year, and profitability increased steadily.

In terms of gross margin, 1H24's gross margin was 16.66%. Among them, the gross margin of IDC and value-added services was about 34.51%, down 4.78pct year on year. We believe that due to the impact of the increase in electricity costs in recent years, the company is actively promoting green data center transformation to gradually improve energy efficiency and reduce operating costs; the gross margin of the cloud computing business was 9.45%, up 1.63 pct year on year. In terms of expenses, 1H24's sales/management/R&D/finance expense ratios changed by 0.08/0.03/0.16/ -1.94pct year-on-year, respectively. The cost side was well controlled. Since the company repaid all US dollar loans in November 2023, 1H24's financial expenses declined significantly.

Maintain an “increase in holdings” rating

We believe that as the company continues to expand its core IDC resource reserves and expand its intelligent computing business, its long-term performance foundation is expected to be further consolidated. Referring to the company's subsequent data center construction and delivery plan, its 24-26 EBITDA is estimated to be 1.696/1.932/2.18 billion yuan. According to the average EV/EBITDA of comparable companies in 2024, they were given an EV/EBITDA of 11.51x in 24, corresponding to a target price of 11.12 yuan, maintaining the “gain” rating.

Risk warning: Customer listing progress falls short of expectations; project construction and delivery progress falls short of expectations.