GDS reported in-line FY1Q22 results with revenue/ adj. EBITDA growth of +32%/ +29% YoY respectively. The company maintained its FY22E guidance and reiterated its +90k organic net adds target although move-in schedule has been delayed because of lockdown. We cut FY22E adj. EBITDA by 3% on lower utilized area while largely maintaining our FY23-24E forecast. Maintain BUY.
FY1Q22 in-line. GDS reported in-line 1Q22 results with revenue of RMB2,244mn (+32% YoY) and adj. EBITDA of RMB1,051mn (+29% YoY).Net loss widened to RMB574mn. GPM declined QoQ to 21.7% (-0.6 pct pts QoQ) on higher utility price (+10% QoQ). On a per kwh basis, GDS is paying around 15% more compared to couple of quarters ago. Company expects 2Q tariff to stabilize at current level. Adj. EBITDA margin was at 46.9% (-0.1 pct pts QoQ).
Unchanged FY22E guidance although move-in schedule being disturbed by lockdown in 1H. Lockdown has resulted in move-in schedule adjustment although the operations of existing data centers are not being interrupted.GDS maintained its FY22E revenue/ adj. EBITDA growth guidance of +22%/+18% YoY, assuming progressive relaxation of lockdowns over the next 1-2 months and that capacity move-in will be skewed towards 2H (~80%).
Customer mix change to continue as internet customers are turning cautious in cloud spending. GDS maintained its full year target of +90k sqm organic net adds in committed area. In 1Q22, GDS achieved 20% of full year target (+18.1k sqm). However, growth rate of total area committed by top two customers, Alibaba and Tencent in our view, continued to slow down to +31%/ -5% YoY (vs. +44%/ -5% YoY in 4Q21) respectively. These two customers contributed 45% of revenue in 1Q22. We expect large enterprise/ FSI revenue contribution to increase gradually. These customers accounted for 45% of 1Q22 bookings.
Maintain BUY. We trimmed FY22E adj. EBITDA by -3% while largely maintaining our FY23-24E forecast to reflect a capacity move-in delay by internet customers in FY22E. Maintain BUY with a target price of HK$44.55 based on lowered 18x (prior 20x) FY22E EV/EBITDA due to macro/ pandemic uncertainty. Catalysts include easing lockdown restrictions, new M&A and customer win.