The third quarter results were in line with expectations, and the full-year CAPEX guidance was raised. In the 3rd quarter of 2024, the company achieved revenue of about 2.966 billion yuan (RMB, same below), a year-on-year increase of 17.7%. The adjusted EBITDA was 1.295 billion yuan, an increase of 15.0% year-on-year (similar growth rate to the second quarter), which is about 26.7% of our previous forecast of 4.85 billion yuan for the full year. The company maintains its annual performance guidelines unchanged. The annual revenue is expected to be between 11.34 billion yuan and 11.76 billion yuan, with a year-on-year growth rate of 13.9-18.1%, and adjusted EBITDA between 4.95 billion and 5.15 billion yuan, with a year-on-year growth rate of 7.0-11.4%. The company's revenue/adjusted EBITDA for the first three quarters of 2024 was approximately 8.42 billion/3.79 billion yuan, respectively, representing 71.6-74.2%/73.6-76.6% of the full-year guideline. The company adjusted its 2024 full-year CAPEX guidelines and raised it from 6.5 billion yuan (2 billion/4.5 billion yuan for China/international business) to 11 billion yuan (3 billion/8 billion yuan for China/international business) to support the accelerated entry of Chinese tenants and the acceleration of international business expansion.

Business in China: Maintaining steady growth. The company's China business achieved revenue of 2.62 billion yuan in the 3rd quarter, up 6.1% year on year. The adjusted EBITDA was 1.205 billion yuan, up 3.6% year on year, and the adjusted EBITDA profit margin fell 1.0 percentage point year on year to 43.7% year on year. The new use area added in the third quarter was 25,647 square meters, which is significantly faster than the 20,265 square meters in the second quarter. The company has put into use an area of 62,744 square meters in the first three quarters of this year, exceeding 48,739 square meters for the whole of last year.

International business: Continuously receiving large-scale orders and entering Thailand for the first time. In the 3rd quarter of 2024, the company signed a large-scale sales contract in Batam, with a contract/reserve capacity of 34/38 MW, and is expected to enter within 18 months. Meanwhile, the company and another leading global technology company recently announced an investment of several billion yuan in Thailand to acquire land for a data center park in Chonburi Province, with a planned power capacity of 120 MW.

As of Q3 2024, international business customers have locked in 431 MW of capacity (Q3 2023/Q2 2024:111/388 MW).

The purchase was maintained, and the target price was raised to HK$22.88. The company's results for the 3rd quarter were in line with expectations. Considering the acceleration of its expansion in overseas markets, we gave a valuation closer to our international peers. The target price was raised to HK$22.88, corresponding to ~14 times the 2024 EV/EBITDA, 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.