Earnings First Take: 1Q22 results in line; FY22 guidance unchanged
- Revenue grew by 31.5% y-o-y to Rmb2,244m, driven by 32.2% y-o-y expansion in utilised area
- Adj EBITDA increased by 28.5% y-o-y to Rm1,051m in 1Q22, in line with market expectation
- FY21 guidance for revenue and adjusted EBITDA remained unchanged
- Maintain BUY with TP of HK$61/US$62
What’s New
– GDS (9698 HK/GDS US) announced its 1Q22 results on 19 May 2022 before Hong Kong market open.
– Revenue increased by 31.5% y-o-y to Rmb2,244m in 1Q22, mainly driven by 32.2% increase in area utilised to 332k sqm.
– Total area committed and pre-committed increased by 24.5% y-o-y to 575k sqm. Area in service increased by 36.6% y-o-y to 492k sqm. Utilisation rate contracted by 2.2ppts y-o-y to 67.4% and expanded by 1.9ppts q-o-q. Commitment rate was stable y-o-y at 95.3% and expanded 1.5ppts q-o-q. Areas under construction slightly decreased by 1.2% y-o-y to 168k sqm, with pre-commitment rate down by 6.9ppts y-o-y to 63.1% while expanding 1.3ppts q-o-q.
– Adj EBITDA increased by 28.5% y-o-y to Rmb1,051m in 1Q22, with adjusted EBITDA margin contracting 1ppt y-o-y to 46.9% while stable q-o-q.
– Net loss expanded 34% y-o-y to Rmb373m in 1Q22, mainly attributable to higher utility cost, depreciation and amortisation, and net interest expenses.
– Guidance for FY22 revenue and adj EBITDA were unchanged at Rmb9,320m-Rmb9,680m and Rmb4,285m-Rmb4,450m. The company maintained the capex budget at Rmb12bn for FY22.
Our View:
– We expect neutral share price reaction.
– Looking into 2Q22, project delivery and customer move-in are still adversely impacted by lockdowns of tier 1 cities in China.
– We remain positive about the company’s long-term outlook as the high commitment rate still indicates resilient demand, despite short-term uncertainties due to macro headwinds.
– We currently rate BUY on the counter with a TP of HK$61/US$62.
– Analyst conference call will be held at 8am HK Time on 19 May 2022.