Group 1 - The company plans to issue convertible preferred bonds totaling $450 million, maturing in 2032, with a potential additional $50 million option for initial purchasers [1] - The net proceeds from the bond issuance will be used for working capital needs and refinancing existing debt, including potential repurchases or redemptions of convertible bonds maturing in 2029 [1][3] - The bonds will be unsecured senior obligations of the company and are expected to be privately placed with qualified institutional buyers under Rule 144A of the Securities Act of 1933 [1] Group 2 - Concurrently, the company intends to register a public offering of American Depositary Shares (ADS), with plans to lend ADS to underwriters for hedging purposes [2] - The number of ADS to be lent will be determined at the time of pricing the hedging placement, and it is expected to be sold simultaneously with the bond and original ADS offerings [2] - The company will receive the net proceeds from the ADS offering, which will also be used for general corporate purposes, working capital needs, and refinancing existing debt [3]

Core Viewpoint - The company reported a strong performance in Q1 2025, with revenue and adjusted EBITDA exceeding expectations, driven by order backlog delivery and new order acceleration [1][2]. Group 1: Financial Performance - In Q1 2025, the company achieved revenue of 2.723 billion yuan, a year-on-year increase of 12.0%, and adjusted EBITDA of 1.324 billion yuan, up 16.1% [1]. - The net profit for the quarter was 411 million yuan, influenced by asset disposal gains of 1.057 billion yuan from the first ABS project [1]. - The adjusted EBITDA margin improved to 48.6%, reflecting a 0.4 percentage point increase due to reduced operating costs [2]. Group 2: Operational Metrics - As of the end of Q1 2025, the company operated in an area of 610,685 square meters, a 14.6% year-on-year growth, with an operational IT scale of approximately 1,313 MW [2]. - The cabinet utilization rate reached 75.7%, a 1.9 percentage point increase, indicating a recovery in domestic data center demand [2]. - The overseas business signed contracts totaling 537 MW, with an operational scale of 143 MW, generating revenue of 0.66 million USD and adjusted EBITDA of 0.21 million USD in Q1 2025 [2]. Group 3: Future Outlook - The company maintains its 2025 revenue guidance of 11.29 to 11.59 billion yuan, representing a year-on-year growth of 9.4% to 12.3%, and adjusted EBITDA of 5.19 to 5.39 billion yuan, a growth of 6.4% to 10.5% [3]. - The net debt to adjusted EBITDA ratio decreased to 6.6 times in Q1 2025, down from 7.7 times in Q1 2024, indicating improved leverage [3]. - The company plans to continue advancing public REITs issuance, which is expected to further reduce leverage and interest expenses, enhancing performance [3]. Group 4: Valuation - The company adjusted its 2025 EV/EBITDA target valuation from 15 times to 16 times, reflecting improved cash flow from increased cabinet utilization and REITs projects [3]. - The target price based on the SOTP valuation method is set at 40.47 HKD per share, up from the previous 36.37 HKD per share, maintaining a "buy" rating [3].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 40.47 [6][7]. Core Insights - The company reported a revenue of RMB 2.723 billion for Q1 2025, a year-on-year increase of 12.0%, and an adjusted EBITDA of RMB 1.324 billion, up 16.1%, exceeding Bloomberg consensus expectations [1]. - The growth in adjusted EBITDA is attributed to the delivery of backlog orders and the rapid advancement of new orders, alongside the completion of the first ABS project, which confirmed asset disposal gains of RMB 1.057 billion [1]. - The report highlights the potential for valuation improvement and performance enhancement driven by the growth in AI inference demand as domestic AI applications flourish [1]. Summary by Sections Financial Performance - As of Q1 2025, the company operated in an area of 610,685 square meters, with an IT capacity of approximately 1,313 MW, and a cabinet utilization rate of 75.7%, reflecting a 1.9 percentage point increase [2]. - The adjusted EBITDA margin improved to 48.6%, primarily due to a decrease in operating costs [2]. - The company expects total revenue for 2025 to be between RMB 11.29 billion and RMB 11.59 billion, representing a year-on-year growth of 9.4% to 12.3% [3]. Debt and Leverage - The net debt to adjusted EBITDA ratio decreased to 6.6 times in Q1 2025 from 7.7 times in Q1 2024, indicating a gradual reduction in leverage following the completion of the ABS project [3]. - The company plans to actively promote the issuance of public REITs, which is expected to further lower leverage and reduce interest expenses, thereby improving performance [3]. Long-term Outlook - The report maintains profit forecasts, projecting adjusted EBITDA for 2025 to be between RMB 5.19 billion and RMB 5.39 billion, with expected growth rates of 6.4% to 10.5% [4]. - The SOTP valuation method was used, adjusting the 2025 EV/EBITDA target valuation from 15 times to 16 times for domestic operations, reflecting improved cash flow from increased cabinet utilization and REIT projects [4]. - The target price of HKD 40.47 per share is based on a total equity value of RMB 57.562 billion, considering both domestic and international business valuations [11].

Core Viewpoint - The company reported a strong financial performance in Q1 2025, with significant year-on-year growth in revenue and adjusted EBITDA, indicating robust operational execution and strategic focus on new orders and delivery of contracted but unbilled space [1][2]. Financial Performance - In Q1 2025, net revenue increased by 12.0% year-on-year to RMB 2,723.2 million (USD 375.3 million) [1]. - The net profit for Q1 2025 was RMB 764.1 million (USD 105.3 million), a significant turnaround from a net loss of RMB 344.9 million in Q1 2024 [1]. - Adjusted EBITDA grew by 16.1% year-on-year to RMB 1,323.8 million (USD 182.4 million), with an adjusted EBITDA margin of 48.6% [1][2]. Operational Metrics - As of March 31, 2025, the total contracted and pre-contracted area was 649,561 square meters, up 6.7% from 608,645 square meters a year earlier [1]. - The billable area reached 462,423 square meters, reflecting a 14.6% increase from 403,609 square meters in the previous year [1]. - The billing rate for operational area was 75.7%, compared to 73.5% as of March 31, 2024 [1]. Strategic Focus - The company emphasized a cautious approach to new orders while actively delivering on contracted but unbilled space, showcasing a commitment to operational excellence [2]. - The acquisition of large-scale new orders across two regions highlights the growing demand in the first-tier market driven by advancements in artificial intelligence [2]. - The completion of China's first data center asset-backed securities transaction has enhanced the company's financing flexibility [2].

Financial Performance - For Q1 2025, GDS Holdings reported a net revenue of RMB 2,723.2 million (USD 375.3 million), representing a year-over-year increase of 12.0% from RMB 2,432.2 million[12]. - The net profit for Q1 2025 was RMB 764.1 million (USD 105.3 million), a significant turnaround from a net loss of RMB 344.9 million in Q1 2024[12]. - Adjusted EBITDA for Q1 2025 grew by 16.1% year-over-year to RMB 1,323.8 million (USD 182.4 million), with an adjusted EBITDA margin of 48.6%[12]. - Gross profit for Q1 2025 was RMB 644.8 million (USD 88.9 million), up 23.7% from RMB 521.2 million in Q1 2024, with a gross margin of 23.7%[14]. - Adjusted gross profit for Q1 2025 was RMB 1,455.4 million (USD 200.6 million), reflecting a 14.6% increase from RMB 1,270.1 million in the prior year[15]. - The net profit for Q1 2025 was RMB 764.1 million (USD 105.3 million), a significant improvement from a net loss of RMB 344.9 million in the same period last year[19]. - Adjusted EBITDA for Q1 2025 was RMB 1,323.8 million (USD 182.4 million), representing a 16.1% increase from RMB 1,140.7 million in Q1 2024[20]. - The adjusted EBITDA margin for Q1 2025 was 48.6%, up from 46.9% in the same period last year, primarily due to a decrease in cash operating costs as a percentage of net income[22]. Operational Metrics - The total contracted and pre-contracted area as of March 31, 2025, was 649,561 square meters, an increase of 6.7% compared to 608,645 square meters a year earlier[12]. - The billing area increased by 14.6% year-over-year to 462,423 square meters as of March 31, 2025[12]. - The operating area billing rate improved to 75.7% from 73.5% in the same period last year[12]. - The total signed and pre-signed area at the end of Q1 2025 was 649,561 square meters, a year-over-year increase of 6.7%[24]. - The operational area at the end of Q1 2025 was 610,685 square meters, reflecting an 11.2% year-over-year increase[26]. - The company reported a billing area of 462,423 square meters at the end of Q1 2025, a 14.6% year-over-year increase[27]. Cash Flow and Debt - As of March 31, 2025, the company had cash of RMB 7,575.7 million (USD 1,044.0 million) and total short-term debt of RMB 4,735.8 million (USD 652.6 million)[23]. - Cash reserves decreased from RMB 7,867,659 thousand to RMB 7,575,709 thousand between December 31, 2024, and March 31, 2025[49]. - Total liabilities increased from RMB 49,979,995 thousand to RMB 49,015,114 thousand during the same period[49]. - The company reported a cumulative loss of RMB (6,044,372) thousand as of March 31, 2025[49]. - Long-term borrowings, excluding the current portion, were RMB 21,905,985 thousand as of December 31, 2024[49]. Strategic Initiatives - The company maintains its revenue guidance for 2025 at RMB 11,290 million to RMB 11,590 million and adjusted EBITDA guidance at RMB 5,190 million to RMB 5,390 million[30]. - The company anticipates growth in the high-performance data center market in Southeast Asia and expects to strengthen relationships with new and existing customers[45]. - The company plans to focus on expanding its service offerings and enhancing operational efficiency to improve profitability in the upcoming quarters[51]. Non-GAAP Metrics - The company utilizes adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit, and adjusted gross profit margin as non-GAAP financial metrics to assess operational performance and set business goals[35]. - The company does not include gains or losses from discontinued operations in adjusted EBITDA and adjusted EBITDA margin, focusing on ongoing business performance[36]. - The adjusted EBITDA and adjusted gross profit metrics are presented as they are frequently used by analysts and investors to evaluate financial performance within the industry[37]. - The company emphasizes that non-GAAP financial metrics should not be considered in isolation from GAAP metrics, as they have limitations[37]. Research and Development - Research and development expenses for Q1 2025 were RMB 7.9 million (USD 1.1 million), down from RMB 10.0 million in the same quarter last year[16]. Interest and Other Expenses - Interest expenses for Q1 2025 decreased by 4.5% year-over-year to RMB 441.5 million (USD 60.8 million) due to lower borrowing levels and interest rates[17]. - The interest expense for the period was RMB 462,508 thousand, which is 19.0% of net revenue[60]. - The depreciation and amortization expenses for the three months ended March 31, 2024, were RMB 782,672 thousand, which is 32.1% of net revenue[60]. Asset Management - The company completed an asset-backed securities transaction in Q1 2025, resulting in a net cash gain of RMB 583.3 million (USD 80.4 million) after reinvestment[29]. - The company holds long-term equity investments valued at RMB 7,544,555 thousand as of December 31, 2024[49]. - The net value of property and equipment was RMB 40,204,133 thousand as of December 31, 2024[49]. Market Position - The company operates high-performance data centers strategically located in major economic centers, catering to significant demand for data center services[42]. - The company provides a range of managed services, including hybrid cloud services and managed network services, to meet the needs of large clients[43]. - The company has a 24-year track record in service delivery, successfully meeting the demands of some of China's largest clients for data center outsourcing[43].

DayOne Investment and Operations - As of December 31, 2024, the company holds a 35.6% equity stake in DayOne, which continues to significantly contribute to overall operational performance and shareholder value[6]. - DayOne's Series A financing was increased from $587 million to $672 million in May 2024, and the Series B financing was raised from $1 billion to $1.2 billion in December 2024[7]. - The company transitioned DayOne from a consolidated subsidiary to an equity investment as of December 31, 2024, following the dilution of its stake from 52.7%[7]. - DayOne is involved in developing and operating data centers in Southeast Asia and Northeast Asia, enhancing the company's value and operational performance[10]. - The company has ceased consolidating DayOne's operational results, which will now be reported as an equity investment[10]. - DayOne has raised a total of $1.672 billion in convertible preferred shares through A and B rounds of financing, with the company not participating in these rounds[65]. - DayOne has a total power capacity of 469 MW, with 132 MW operational and 369 MW under construction as of December 31, 2024[66]. Financial Performance and Revenue - Revenue contributions from the VIE and its subsidiaries accounted for 96.1% of total revenue in 2024, down from 97.0% in 2023[9]. - The company's consolidated financial statements for the fiscal year 2024 reflect DayOne's operations as discontinued business, with historical profits and cash flows adjusted for consistent comparison[8]. - The company’s financial performance for the fiscal year 2024 includes adjustments to reflect DayOne's operations as discontinued, ensuring clarity in financial reporting[8]. - The company's net revenue increased from RMB 9,268.1 million in 2022 to RMB 10,322.1 million in 2024, representing a growth of 5.5%[36]. - The adjusted EBITDA rose from RMB 4,333.7 million in 2022 to RMB 4,876.4 million in 2024, indicating a steady increase in operational efficiency[36]. - The company reported a significant increase in revenue, reaching $1.2 billion, representing a 15% year-over-year growth[165]. - The company reported a significant increase in revenue, achieving a total of 60 million in 2024, reflecting a growth of 15% compared to the previous year[180]. VIE Structure and Regulatory Compliance - The company operates primarily through a VIE structure due to regulatory restrictions on foreign ownership in telecommunications-related businesses in China[9]. - The company relies on contractual arrangements to control its variable interest entities (VIEs) and their operations, which are consolidated in the financial statements[14]. - There is uncertainty regarding the effectiveness of the contractual arrangements in providing control over the VIEs compared to direct ownership[15]. - The company is currently operating in a sector classified as value-added telecommunications, which restricts foreign investment, raising compliance risks[17]. - Future legislative changes may require the company to take further actions regarding its contractual arrangements, potentially impacting its operations[17]. - The company may face significant penalties if its corporate structure and contractual arrangements are found to violate current or future Chinese laws[17]. - The financial performance of the VIEs and their subsidiaries may not be consolidated if the contractual arrangements are deemed non-compliant, adversely affecting the company's financial condition[17]. Data Center Operations and Capacity - The total net floor area in operation as of December 31, 2024, is 613,583 square meters, with 91.9% contracted by customers[30]. - The total net floor area under construction is 102,691 square meters, with 64.1% pre-contracted by customers[30]. - The company operates 91 self-developed data centers with a total net floor area of 608,970 square meters as of December 31, 2024[35]. - The total capacity of the company's data centers, including operational and under construction, is 716,274 square meters, with an estimated potential development area of approximately 388,922 square meters[35]. - The average power density of operational and under-construction data centers is approximately 2.2 kW/square meter, with under-construction facilities averaging 2.35 kW/square meter[55]. - The average PUE for newly operational data centers since 2020 is approximately 1.24, indicating high energy efficiency[55]. - The company operates data centers strategically located in major economic centers, focusing on high-performance services[30]. Customer Base and Retention - The company serves 926 clients, including major cloud service providers and large internet companies, with contracts typically ranging from 1 to 10 years[34]. - The average customer churn rate for 2023 and 2024 is approximately 1.4% and 1.2%, respectively[44]. - The company has a contracted area utilization rate of 91.9% as of December 31, 2024, down from 95.5% in 2022[35]. - Customer satisfaction survey conducted by NielsenIQ in December 2024 showed an average satisfaction score of 9.68 out of 10, with the net promoter score increasing from 85% in 2023 to 91% in 2024[87]. - The company reported a net profit margin of 20%, up from 18% in the previous year, reflecting improved operational efficiency[165]. - Customer retention rate improved to 85%, up from 80% last year, indicating stronger customer loyalty[165]. Regulatory Environment and Compliance - The complex regulatory environment in mainland China may lead to significant adverse changes in the company's operations and the value of its American Depositary Shares[19]. - Any changes in policies or regulatory measures could impose compliance costs on the company[19]. - The company is subject to the new cybersecurity review regulations, requiring operators with over 1 million user personal information to undergo security assessments before going public abroad[150]. - The implementation of the Data Export Security Assessment Measures mandates data processors to report to national authorities when providing important data abroad, affecting operational strategies[151]. - The evolving legal framework necessitates ongoing adjustments to the company's operational and compliance strategies to mitigate risks associated with data security[152]. - The company must navigate the evolving regulatory landscape, which includes potential uncertainties regarding the applicability of new laws and regulations to its operations[151]. Strategic Initiatives and Future Outlook - The company’s strategic focus includes market expansion and potential new product development through its equity investments[10]. - Market expansion plans include entering three new international markets by the end of the year, projected to increase user base by 30%[165]. - The company is considering strategic acquisitions to bolster its market position, with a budget of $100 million allocated for potential deals[165]. - The company plans to enhance its marketing strategy, allocating an additional $10 million to digital marketing efforts[165]. - The company is committed to compliance with new regulatory frameworks, ensuring all operations align with the latest guidelines[180]. Environmental and Sustainability Efforts - Approximately 40% of the company's operational electricity consumption in 2024 comes from renewable energy sources[99]. - Carbon emissions have been reduced by over 1 million tons in 2024 due to various decarbonization measures[99]. - The average Power Usage Effectiveness (PUE) of self-developed data centers with an IT load rate of 30% or above is approximately 1.24[99]. - The new regulations emphasize the importance of energy consumption reduction and carbon neutrality in the development of data centers across various regions[136]. Employee and Management Structure - As of December 31, 2024, the company has 2,276 employees, with 75.5% in colocation services[102]. - Female representation among mid-level management is 27.75%, and among senior management, it is 31.58%[100]. - The employee turnover rate for the year is 13.2%[100]. - The company has a competitive compensation and benefits structure, with no significant labor disputes reported[103]. Legal Matters - The company is currently involved in a class action lawsuit in the U.S. District Court for the Central District of California, which alleges violations of the Securities Exchange Act of 1934, with a revised complaint submitted on December 18, 2023[105]. - A motion to dismiss the revised complaint was filed on February 5, 2024, with the plaintiffs opposing this motion on March 4, 2024[105]. - A preliminary approval of a settlement agreement was granted on October 9, 2024, with a final approval hearing scheduled for February 10, 2025[105].

Investment Rating - The investment rating for the company is "Outperform the Market" and is maintained [2] Core Views - The report highlights that domestic capital expenditure is increasing while overseas business is growing rapidly. The company expects revenue growth of 5.5% in 2024, with a projected revenue of 10.322 billion RMB [6][7] - The overseas business has shown significant growth, with a revenue increase of 618.2% year-on-year, reaching approximately 1.729 billion USD [6] - The company is expanding its data center capacity, with a commitment usage rate of 91.9% and an expected increase in operational capacity in the coming years [6][7] Financial Data and Forecasts - Revenue projections for 2023 to 2027 are as follows: 9.957 billion RMB (2023), 10.322 billion RMB (2024), 11.440 billion RMB (2025), 12.927 billion RMB (2026), and 14.866 billion RMB (2027), with year-on-year growth rates of 6.8%, 3.7%, 10.8%, 13.0%, and 15.0% respectively [5][10] - The net profit forecast shows a loss of 4.344 billion RMB in 2023, followed by a profit of 3.371 billion RMB in 2024, and losses in subsequent years, with projections of -825 million RMB (2025), -728 million RMB (2026), and -462 million RMB (2027) [5][10] - The adjusted EBITDA for 2024 is expected to be 48.76 billion RMB, with a margin of 47.2% [6] Business Performance - The company’s domestic business is accelerating, with a projected revenue of 10.322 billion RMB in 2024, reflecting a 3.67% increase [10] - The overseas business is expected to contribute significantly to future revenues, with a projected EBITDA of 11.40 billion RMB in 2025 [7][8] - The company plans to increase capital expenditure to approximately 4.3 billion RMB in 2025, up from 3 billion RMB in 2024 [6][7] Valuation - The overall valuation for the company is estimated between 467.51 billion RMB and 590.19 billion RMB, with a reasonable stock price range of 32.98 to 41.63 HKD [8] - The report uses a forward dynamic EV/EBITDA multiple of 14-16 times for the company and 20-21 times for its overseas business [8]

Investment Rating - The report maintains a "Buy" rating for the company [6] Core Views - The company is expected to achieve a revenue of 10.322 billion RMB in 2024, representing a year-on-year growth of 3.67%, and an adjusted EBITDA of 4.876 billion RMB, reflecting a growth of 10.76% in 2025 [5][3] - The growth in AI inference demand is anticipated to reduce the domestic data center vacancy rate, leading to valuation enhancement and performance improvement opportunities for the company [1][4] - The company has signed new domestic orders amounting to 152MW, indicating a positive trend in domestic business [2] Summary by Sections Financial Performance - In 2024, the company is projected to achieve an operating income of 10.322 billion RMB, a 5.5% increase from the previous year, and an adjusted EBITDA of 4.876 billion RMB, a 3% increase [1] - For 2025, the total revenue is expected to be between 11.29 billion RMB and 11.59 billion RMB, with an adjusted EBITDA forecasted between 5.19 billion RMB and 5.39 billion RMB [3] Business Development - As of the end of Q4 2024, the company’s operational area reached 613,583 square meters, with a cabinet utilization rate of 73.8% [2] - The company plans to increase its capital expenditure budget to 4.3 billion RMB in 2025 to meet the construction needs of the new signed orders [3] Valuation - The report employs a Sum-of-the-Parts (SOTP) valuation method, assigning a target EV/EBITDA multiple of 15x for domestic operations, leading to a target price of 36.37 HKD per share [4][10]

Investment Rating - The report has downgraded the investment rating to "Accumulate" from "Buy" [3][5]. Core Views - The company benefits from the AI trend, with a significant increase in new contracts and a strong growth outlook for 2024 [2][3]. - The company achieved a revenue of 10.322 billion RMB in 2024, representing a year-on-year growth of 5.5% [1][4]. - The adjusted EBITDA for 2024 was 4.876 billion RMB, with a slight decrease in the EBITDA margin to 47.2% [1][4]. Summary by Sections Financial Performance - In Q4 2024, the company added 14,440 square meters of new usage area, with 14,275 square meters from organic growth [1]. - The total signed area reached 630,000 square meters, with a significant new contract of 40,000 square meters expected to positively impact revenue [2]. - The company expects total revenue growth of 9.4%-12.3% in 2025, projecting revenue between 11.29 billion and 11.59 billion RMB [2]. Future Projections - Revenue projections for 2025-2027 are estimated at 11.5 billion, 12.8 billion, and 13.7 billion RMB respectively [3]. - Adjusted EBITDA for the same period is projected to be 5.29 billion, 5.77 billion, and 6.18 billion RMB [3]. Valuation Metrics - The target valuation for the company is set at 45 billion RMB, corresponding to an EV/Adjusted EBITDA of approximately 15x for 2025 [3]. - Current stock price reflects an EV/Adjusted EBITDA of 14.3x for 2025, 13.0x for 2026, and 11.8x for 2027 [3][4].

Investment Rating - The report downgrades the investment rating to "Accumulate" from "Buy" [3][5] Core Views - The company benefits from the AI trend, with a significant increase in new contracts and usage area, leading to stable revenue growth [2][3] - The company achieved a total revenue of 10.32 billion RMB in 2024, representing a year-on-year growth of 5.5% [1][4] - The adjusted EBITDA for 2024 was 4.88 billion RMB, with a slight decrease in the EBITDA margin [1][4] Summary by Sections Financial Performance - In Q4 2024, the company added 14,440 square meters of new usage area, with 14,275 square meters from organic growth [1] - The total signed area reached 630,000 square meters, with a significant project awarded in Q1 2025, expected to positively impact revenue [2] - The company projects a revenue growth of 9.4%-12.3% for 2025, targeting 11.29-11.59 billion RMB [2] Future Outlook - The company has a backlog of 177,000 square meters and a total of 1.105 million square meters in construction and operational space [2] - Revenue estimates for 2025-2027 are projected at 11.5 billion, 12.8 billion, and 13.7 billion RMB respectively [3] Valuation Metrics - The target valuation is set at 45 billion RMB, corresponding to an EV/Adjusted EBITDA of approximately 15x for 2025 [3] - Current stock price reflects an EV/Adjusted EBITDA of 14.3x for 2025, indicating a potential upside [3][5]