Earnings First Take: 1Q22 adjusted EBITDA grew by 21.9% y-o-y, higher than market expectations
- Revenue increased by 18.6% y-o-y to Rmb1,645m in 1Q22, driven by 28.1% y-o-y expansion in utilised cabinets
- Adjusted EBITDA grew by 21.9% y-o-y to Rmb506m, higher than market expectations
- FY22 guidance for revenue and adjusted EBITDA remains unchanged
- Currently rate BUY with TP of US13.6 for its promising wholesale transformation and resilient data centre demand in China
What’s New
– VNET (VNET US) announced its 1Q22 results on 25 May 2022 (after US market close on 24 May 2022).
– Revenue increased by 18.6% y-o-y to Rmb1,645m in 1Q22. Project delivery and customer move-in in 1Q22 were impacted by major cities lockdowns in China.
– Total cabinets in service increased by 41.2% y-o-y to 79k, with net additions of 0.4k cabinets in 1Q22. Utilised cabinets increased by 28.1% y-o-y to 43k. Utilisation rate dropped 5.5ppts y-o-y to 54.5%.
– Adjusted cash gross profit increased by 13.1% to Rmb685m, with adjusted cash gross margin contracting 2ppts y-o-y to 41.6%.
– Adjusted EBITDA increased by 21.9% y-o-y to Rmb506m in 1Q22, higher than market expectations, thanks to better operating cost control. Adjusted EBITDA margin expanded 0.9ppt y-o-y to 30.8%.
– Net profit was Rmb91m in 1Q22, compared to a net loss Rmb85m in 1Q21, mainly contributed by the increase in fair value of convertible promissory notes and foreign exchange gains.
– FY22 guidance for revenue and adjusted EBITDA remains unchanged at Rmb7,450m-Rmb7,750m and Rmb1,975m-Rmb2,125m, with midpoints implying 22.8% and 16.9% y-o-y growth respectively.
Our View:
– We expect positive share price reaction on stronger than expected adjusted EBITDA in 1Q22.
– Looking into 2Q22, project delivery and customer move-in are still adversely impacted by lockdowns of tier 1 cities in China, which could put pressure on adjusted EBITDA growth in 2Q22.
– We currently rate BUY on the counter for its promising wholesale transformation and resilient data centre demand in China; TP of US13.6.
– Analyst conference call will be held at 9am HK Time on 25 May 2022.
