GDS Downgrades 2021 Guidance Slightly but Continues Rapid Expansion

GDS reported a solid third-quarter result with both revenue and EBITDA up around 35% year on year and further site acquisitions and customer additions. However, as a result of a slower customer move-in rate in the second half and recent increases in power costs, management now expects total revenue and adjusted EBITDA for the full year of 2021 to be in the lower half of the originally provided guidance ranges of CNY 7,700–CNY 8,000 million for total revenue and CNY 3,660–CNY 3,800 million for adjusted EBITDA. Capital expenditure guidance was also increased to CNY 16 billion from CNY 12 billion. We made minor adjustments to our forecasts and fair value increased to HKD 45 (USD 46) from HKD 44 (USD 45) on CNY strength. While the stock price has fallen around 36% year-to-date we still see it as mildly expensive.