Earnings Alert: 3Q21 results beat; management revised up adjusted EBITDA growth guidance by 1.5ppts

What’s New

  • 3Q21 results beat, adjusted EBITDA increased 22% y-o-y
  • Management revised up adjusted EBITDA growth guidance by 1.5ppts
  • Limited margin pressure from potential power tariff hike 
  • Maintain BUY with TP unchanged at US$27

3Q21 result highlights

Revenue increased by 25% y-o-y to Rmb1,560m in 3Q21, beating the high-end of management’s guidance of Rmb1,530-1,550m, mainly driven by 18% y-o-y increase in utilised cabinets to 380k and cloud business expansion. Capacity utilisation rate dropped by 4.4ppts y-o-y to 59.8% due to 27% increase in total cabinets, while it was stable q-o-q.

Adjusted cash gross profit increased by 28% to Rmb674m in 3Q21, with adjusted cash gross margin expanding 1ppt y-o-y to 42.8% on improved operating efficiency. Adjusted EBITDA increased by 22% y-o-y to Rmb450m in 3Q21, exceeding the high-end of management’s guidance of Rmb420-440m, with adjusted EBITDA margin contracting 0.7ppt y-o-y to 28.9%. Net profit increased 61% y-o-y to Rmb156m in 3Q21, mainly attributable to Rmb186m increase in the fair value of convertible promissory notes.



The company’s revenue guidance range was narrowed to Rmb6,190m-Rmb6,210m from Rmb6,130-Rmb6,300 with midpoint unchanged, representing 28.2%-28.6% y-o-y growth. Adjusted EBITDA guidance range was narrowed to Rmb1,740m-Rmb1,760m from Rmb1,680-Rmb1,780, representing 31.4%-32.9% y-o-y growth. Management revised up the adjusted EBITDA growth of the midpoint by 1.5ppts.

Management has maintained 25k net-add cabinets for FY21-22, with 80% secured for FY22. Management also kept the utilisation rate target of 60% for FY21. However, the mid-point of 4Q21 guidance range implied a decrease in adjusted EBITDA margin y-o-y to 26.1%, which might be affected by the delivery of 12.7k cabinets in 4Q21.

Retail MRR increased 2.4% y-o-y or 3.1% q-o-q to Rmb9,296 in 3Q21. Management expected MRR to be stable around Rmb9,000 with quarterly fluctuations.

Management expected limited margin pressure from potential power tariff hike, as VNET could pass through the higher power cost to all wholesale customers and a portion of the retail customers. Besides, given the nature of a short contract period of one to three years for retail customers, VNET has the flexibility to add the pass-through mechanism upon contract renewal.


VNET continues to strive for green development in driving energy efficiency and energy saving. The Boxing data centre in Beijing and Nantong data centre in Jiangsu province have been awarded the 5A Green Data Centres for their operations, which is the highest rating of data centres in China. Currently, 30% of the power consumption for Shanghai data centres is from renewable energy.

We have largely maintained our adjusted EBITDA forecasts unchanged. We project adjusted EBITDA to grow by 33%, 49% and 30% in FY21, FY22 and FY23 respectively. We maintain our BUY call on VNET for its stronger growth outlook. Our TP of US$27 is based on 15x FY22 EV/Adjusted EBITDA (unchanged), which is 10x lower than the average of its wholesale peers.