2025-12-04 02:22Summary of China & ASEAN Data Centers Conference Call Industry Overview - The report focuses on the China and ASEAN data center sector, highlighting positive trends in order volume, capital expenditure (capex) expansion, and capital recycling strategies for companies like GDS and VNET [1][6][37]. Key Companies - GDS Holdings (GDS): Target price set at US$43/HK$42 for ADR/H-share, reflecting a slight decrease from previous targets. Valuation of DayOne, a subsidiary, increased by 17% to US$10.5/HK$10.2 per GDS ADR/H-share [1][49]. - VNET: Maintained a target price of US$14, with a Buy rating [1][49]. Core Insights - Order Volume and Demand: Both GDS and VNET are expected to secure around 300MW of orders each in 2026, representing a significant increase in market share from 9% in 2025 to approximately 20% of incremental data center demand in China [6][10]. - Capex Growth: GDS's organic capex is projected to reach Rmb7 billion in 2026, up from Rmb4.8 billion in 2025, to support capacity expansion. VNET's capex is expected to exceed Rmb8 billion for 350-400MW capacity delivery [6][7]. - Favorable Financing Environment: The report notes a positive outlook for financing, with GDS and VNET expected to generate substantial operating cash flow (Rmb4 billion+ for GDS and Rmb3 billion+ for VNET in 2026) [7][10]. Financial Performance - DayOne's Performance: DayOne reported a significant year-over-year growth in revenue (+177%) and adjusted EBITDA (+358%), indicating strong operational execution and capacity expansion [53][59]. - Capacity Expansion: DayOne aims to reach approximately 1GW of committed capacity by the end of 2025, with ongoing projects in Thailand and other regions [53][54]. Market Trends - Data Center Demand Growth: The China data center market is projected to grow at a CAGR of 23% from 2024 to 2028, reaching 33GW by 2028 [10][12]. - Utilization Rates: GDS and VNET are expected to account for over 11% of data center demand in China by 2028, driven by above-industry utilization rates [17][12]. Regulatory Environment - New electricity tariffs in Malaysia may increase operational costs for data center operators, while stricter water consumption rules could benefit companies like DayOne that focus on higher-tier data centers [54][54]. Valuation Adjustments - GDS's valuation was adjusted to Rmb66 billion or US$37.4/HK$36.4 per ADR/H-share due to increased share count from recent offerings. DayOne's valuation was raised based on improved growth estimates [48][49]. Conclusion - The outlook for the China and ASEAN data center sector remains positive, with strong demand, increased capex, and favorable financing conditions. GDS and VNET are well-positioned to capitalize on these trends, supported by robust operational performance and strategic expansions.