Universal Data: The world's leading data center service provider. Beginning in 2009, the company began a service-oriented to resource-driven transformation. After 2016, the company further expanded the coverage of data centers in domestic core cities, including the Beijing-Tianjin-Hebei region, Yangtze River Delta region, central China region, Guangdong-Hong Kong-Macao Greater Bay Area, Inner Mongolia region, and southwest China region. Since 2021, the company began to lay out Southeast Asian markets such as Singapore, Malaysia, and Indonesia, and gradually formed a Singapore-Johor-Batam regional strategy. In 2024, the company established Fuchu-shi, Japan to enter the Northeast Asian data center market.

The company's revenue has grown steadily, and profitability has rebounded. The company's total revenue for the full year of 2023 was 995.7 billion yuan. Among them, the company's overseas business developed rapidly, with a year-on-year growth rate of 494%. The company's gross margin saw a slight recovery in the first two quarters of 2024, at 21.8%/22.6%, respectively. Meanwhile, the company's EBITDA margin rebounded to 24.7% in the first half of 2024, reflecting a recovery in the company's profitability.

Domestic demand for computing power is gradually increasing, and the development trend of data centers is obvious. At the level of digital transformation, according to an Accenture survey, 53% of surveyed Chinese companies are willing to continue to invest more in digitalization. At the technical level, heterogeneous computing has solved the computing power bottleneck of domestic enterprises, and multi-core heterogeneity has promoted the booming development of the domestic computing power sector. After more than 20 years of development, China's data centers have shown a clear trend of clustering, and the data center layout shows a deployment trend of “center to periphery” and “east to west”. The company focuses on exploring and implementing new energy architectures and core technology solutions such as liquid cooling, energy storage, and hydrogen energy to form the Turbo series products in Smart DC, and is committed to achieving carbon neutrality when the country's carbon reaches its peak in 2030.

The Southeast Asian data center market has strong potential for development. The digital economy market in Southeast Asia has been expanding rapidly in recent years. On October 28, 2023, IDC predicted that the digital economy in Southeast Asia will reach 15.8%, surpassing the US (9.4%) and the European Union (8.7%). The Southeast Asian e-commerce market has achieved remarkable results with the support of local e-commerce and cross-border e-commerce. A large number of Chinese enterprises, such as PT Huawei, ZTE, Fenghuo International, and China Mobile International, have helped build the local digital economy industry infrastructure. Meanwhile, the rise of AI technology has triggered a surge in demand for data centers in Southeast Asia. Southeast Asian governments have also provided preferential measures such as tax exemptions and commercial facilitation services for the introduction of foreign-funded data centers. In recent years, while speeding up the construction and operation of overseas data centers, the company has actively signed contracts with overseas power companies to ensure stable electricity supply. Furthermore, the company is deepening cooperation with overseas technology companies to explore fuel cell power solutions.

Investment proposal: The company is expected to achieve operating income of 11.42/13.58/16.01 billion yuan in 2024-2026, and achieve an EBITDA of 4.86/5.55/ 6.45 billion yuan, corresponding EV/EBITDA of 14/12/11x, respectively.

Under industrial trends such as artificial intelligence, cloud computing, and 5G, data centers are expected to continue to grow at a high rate. Considering the company's outstanding comprehensive competitive advantage and sufficient resource reserves, it is expected to accelerate development. Optimistic about the company's business prospects, covered for the first time, and gave a “recommended” rating.

Risk warning: Policy implementation falls short of expectations, increased industry competition, risks brought about by macroeconomic fluctuations, data center listing rates falling short of expectations, excessive debt ratios, and the possibility of refinancing.