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Earnings First Take: 3Q21 results in line; FY21 guidance revised down

  • Guidance for FY21 revenue and adjusted EBITDA are revised down to Rmb7,700m-Rmb7,850m and Rmb3,660m-Rmb3,730m respectively
  • Adjusted EBITDA increased by 34% y-o-y to Rmb962m in 3Q21, in line with market expectation
  • Revenue grew by 35% y-o-y to Rmb2,061m in 3Q21, driven by 39% y-o-y expansion in utilised area to 300k sqm
  • Expect negative share price movement to downward revision in FY21 guidance due to a slower move-in rate in 2H21
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What’s New

– GDS (9698 HK / GDS US) announced its 3Q21 results on 16 Nov 2021 after Hong Kong market close.

– Revenue increased by 35% y-o-y to Rmb2,061m in 3Q21, mainly driven by 39% increase in utilised area to 300k sqm.

– Total area committed and pre-committed increased by 32% y-o-y to 532k sqm. Area in service increased by 56% y-o-y to 453k sqm, with utilisation rate down by 7.9ppts to 66.3% and commitment rate stable at 95.9%. Areas under construction decreased by 7% y-o-y to 157k sqm, with pre-commitment rate down by 11.6ppts to 62.1%.

– Adjusted EBITDA increased by 34% y-o-y to Rmb962m in 3Q21, with adjusted EBITDA margin contracting 0.3ppt y-o-y to 46.7%.

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– The net loss expanded 47% y-o-y to Rmb301m in 3Q21, mainly attributable to higher utility cost and 55% y-o-y increase in depreciation and amortisation.

– Guidance for FY21 revenue and adjusted EBITDA are revised down from Rmb7,700m-Rmb8,000m and Rmb3,660m-Rmb3,800m to Rmb7,700m-Rmb7,850m and Rmb3,660m-Rmb3,730m respectively. The company lifted Capex budget from Rmb12bn to Rmb16bn for FY21.

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Our View:

– We expect negative share price reaction to downward guidance revision.

– The slower move-in rate is due to higher utility cost and slower server shipments, which should be temporary.

– We currently rate BUY on the counter.

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