Incident: On November 19, GDS.O & 9698.HK released financial results for the third quarter of 2024. 24Q3 achieved operating income of 2.966 billion yuan (yoy +17.73%), adjusted EBITDA of 1.296 billion yuan (yoy +15.04%), and an EBITDA rate of 43.7% (yoy-1.0pct).

Driven by AI demand, 24Q3's revenue growth continued to accelerate. 24Q3 achieved operating income of 2.966 billion yuan (yoy +17.73%, 24Q1/Q2 increased 9.07%/14.33% respectively), net profit of -0.192 billion yuan (continuous year-on-year loss reduction in a single quarter since 24Q1), adjusted EBITDA of 1.296 billion yuan (yoy +15.04%), and an adjusted EBITDA rate of 43.7% (yoy-1.0pct, mainly due to the rise in 23H2 electricity prices), benefiting from AI Driven by demand, 24Q3's revenue growth continued to accelerate. Among them, 24Q3's international business achieved revenue of 0.363 billion yuan (yoy +636.3%, qoq +42.2%).

In terms of full-year guidance, the company maintains revenue for the full year of 24 and adjusted EBITDA guidelines. It expects full-year revenue of 11.34-11.76 billion yuan (yoy +13.9%-18.1%) and adjusted EBITDA of 4.95-5.15 billion yuan (yoy +7.0%-11.4%) for the full year of '24.

Domestic business: Accelerated data center delivery, increased listing rate, and raised domestic Capex guidelines throughout the year.

1) In terms of data center delivery: 24Q3's domestic data center added more than 0.025 million square meters of usage area (equivalent to more than 0.01 million standard cabinets). All of the demand comes from the first-tier market (mainly AI demand, half from new orders and half from backlog orders). It is estimated that the new usage area of domestic data centers will be about 0.06 million square meters (equivalent to 0.024 million standard cabinets, equivalent to the peak level in 2020). In the future, the company expects that the scale of AI deployment in first-tier cities will continue to expand (due to the release of demand for inference applications). The company has large scarce resources in Beijing, Shanghai, Guangshen and other places, and is expected to continue to benefit.

2) In terms of MSR: In 24Q3, the MSR of domestic data centers reached 2,034 yuan (yoy -4.37%), and the MSR is expected to drop by about 2% year-on-year in a single quarter over the next 4 quarters.

3) In terms of listing rate: With the accelerated delivery of customer orders, the 24Q3 domestic data center listing rate reached 73.6% (yoy+0.9pct), and the listing rate continued to increase.

4) Domestic capex: The company's domestic capex totaled 2.6 billion yuan in the first three quarters of 24 (previously estimated domestic capex of 2.5 billion yuan for the full year of '24), and the company raised domestic capex to 3 billion yuan in '24 to meet the rapid growth in customer demand.

5) Domestic market guidelines: Domestic data centers are expected to add 0.06 million square meters (equivalent to 0.024 million standard cabinets) in 25, MSR will drop by about 2%, and the domestic market growth rate is expected to reach 10%.

International business demand continued to rise, and the Thai market layout was promoted in 24Q3.

1) Delivery status: As of 24Q3, the IT capacity of the company's international market data center reached 102.9 MW. Considering that most of the current backlog orders have a short follow-up delivery cycle and fast customer listing speed, it is estimated that the IT capacity of the company's international market data center will reach about 400 MW in the next 18 months.

2) In terms of international business orders: The total IT capacity of 24Q3's international business orders has reached 431 MW (388 MW for 24Q2), mainly due to continued high demand in the Southeast Asian market. The company's NTP in Johor, Malaysia and the NDP park in Batam, Indonesia have added 0.016 million square meters of contract area. Among them, the company signed an order with a leading global company for an NDP park project in Batam, Indonesia (Asia's first data center specially designed for AI technology). It has reserved 34 MW of IT capacity and reserved 38 MW, and plans to complete all delivery and put into use within 18 months.

3) In terms of market layout: Recently, the company reached a land acquisition agreement in Thailand to develop a data center park with a total IT capacity of about 120MW in Chonburi province in southeastern Bangkok. Currently, it has received full support from the Thai government. At the same time, the company recently received 1 billion US dollars in equity financing (total equity financing for international business reached 1.672 billion US dollars), which provided strong support for the subsequent expansion of the company's overseas market layout.

Risk warning: The macroeconomic environment is disturbing beyond expectations, geopolitical conflict intensifies, market competition intensifies, capital expenditure for key customers falls short of expectations, delivery of IDC computer rooms at home and abroad falls short of expectations, etc.