Earnings First Take: 2Q22 adjusted EBITDA grew by 14.5% y-o-y, higher than market expectations
- Revenue increased by 15.2% y-o-y to Rmb1,725m in 2Q22, driven by 21.6% y-o-y expansion in utilised cabinets
- Adjusted EBITDA grew by 14.5% y-o-y to Rmb487m, above market expectations, due to better-than-expected operating cost control
- Management revised down full year revenue and adjusted EBITDA guidance by 3% and 9% respectively
- Expect negative share price reaction in the near term
What’s New
– VNET (VNET US) announced its 2Q22 results on 31 Aug 2022 (after US market close on 30 Aug 2022).
– Revenue increased by 15.2% y-o-y to Rmb1,725m in 2Q22 with wholesales business continued making good progress.
– Total cabinets in service increased by 28.6% y-o-y to 81k, with net additions of 1.9k cabinets QoQ in 2Q22. Utilised cabinets increased by 21.5% y-o-y to 45k. Utilisation rate dropped 3.1ppts y-o-y to 55.1%.
– Adjusted cash gross profit increased by 11.5% to Rmb714m, with adjusted cash gross margin contracting 1.4ppts y-o-y to 41.4%.
– Adjusted EBITDA increased by 14.5% y-o-y to Rmb487m in 2Q22, above market expectations, thanks to better-than-expected operating cost control. Adjusted EBITDA margin lowered 0.2ppt y-o-y to 28.2%.
– VNET recorded a net loss of Rmb377m in 2Q22, vs a net profit of Rmb456m in 2Q21, mainly due to a foreign exchange loss of Rmb320m in 2Q22, vs. Rmb78m gain in 2Q21.
– The company revised down its full year revenue guidance by 3% (based on mid-point) to Rmb7,250-7,550m (from previously Rmb7,450-7,750m). It also cut its EBITDA guidance by 9% (based on mid point) to Rmb1,800-1,950m (from previously, Rmb1,975-2,125m). This is mostly due slower capacity and project delivery amid Covid resurgence in 2Q, which pushing back the schedule to 2H22 or even FY23.
Our View:
– We expect negative share price reaction on downward adjusted EBITDA guidance revision in the near term.
– VNET made good progress in wholesale business. It recently (1) extended contract with a leading social platform in China with new capacity of 14MW, and (2) signed a new contract of 15MW capacity with a leading cloud player in China.
– We remain positive on the company’s long term outlook.
– We currently rate BUY on the counter with TP of US$12.4.
