Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VNET Group Inc (VNET, Financial) reported a 12.4% year-over-year increase in net revenues to CNY2.12 billion, driven by the growth of its wholesale IDC business.
- Adjusted EBITDA increased by 20.2% year over year to CNY595 million, reflecting effective cost and resource allocation optimization.
- The wholesale business segment saw a significant revenue increase of 86.4% year over year, reaching CNY523 million, due to rising demand.
- VNET Group Inc (VNET) secured six new orders totaling 84 megawatts, indicating strong customer demand and market position.
- The company maintained a strong cash position and unused credit line, supporting current operations and future development plans.
Negative Points
- Despite strong growth, the utilization rate for the wholesale business, although improved, still stands at 78%, indicating room for further optimization.
- The retail IDC business showed stable capacity and utilization rates, suggesting limited growth in this segment compared to wholesale.
- VNET Group Inc (VNET) faces risks and uncertainties related to forward-looking statements, which could impact future performance.
- The company's CapEx is expected to reach the high end of guidance at CNY5.5 billion, indicating significant capital expenditure requirements.
- The pre-REITs project for the Taicang campus is still in the ramping up stage with a current utilization rate of around 50%, which may affect immediate returns.
Q & A Highlights
Q: What is driving the demand for VNET's new orders, and how is the pricing or return on these new orders?
A: Ju Ma, Executive Vice President, explained that the demand is primarily driven by AI workload-related requests, with 90% of new orders being AI-related. The pricing for new orders remains consistent with previous ones, and due to economies of scale, construction costs are decreasing, leading to increased ROI.
Q: Can you provide more details on the green energy project in Ulanqab and its impact on pricing and margins?
A: Qi Yang, Senior Vice President, stated that the Ulanqab project, approved by Inner Mongolia's energy authorities, will generate 700 million kilowatt-hours of green electricity annually. This will provide long-term green energy supply to the Ulanqab campus, improving margins due to the integrated green power supply.
Q: Could you share details about the pre-REIT project in Taicang and future similar projects?
A: Gavin Shen, CEO, mentioned that the Taicang project's utilization rate is around 50% and is expected to reach 95% by the end of next year. The project marks the first direct investment by a major Chinese insurance company in domestic IDC assets. VNET plans to pursue similar projects, with the next target being the Ulanqab project in 2025.
Q: What is the outlook for demand in regions like Mongolia and Hebei, and how will this affect CapEx?
A: Gavin Shen highlighted that VNET will focus on three strategic regions: Ulanqab, Huailai, and Taicang. Ulanqab will focus on large-scale training, Huailai on inference and small-scale training, and Taicang on supporting Jiangsu region clients. CapEx will be directed towards these strategic areas.
Q: What are the key drivers for the improved gross profit margin, and what is the future trend?
A: Qiyu Wang, CFO, attributed the improved gross profit margin to optimization of IDC centers, a higher share of wholesale business, and adjustments to discount terms. These factors are expected to continue supporting a positive gross margin trend.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
