CICC: Upgrading VNET (VNET.US) target price to USD15.6 on rising computing power demand, which is expected to drive further growth in performance.

On February 20, CICC released a research report stating that the continuous progress of large models at home and abroad has led to an increase in computing power demand, which is expected to drive further growth in VNET's (VNET.US) performance. The brokerage maintained its "outperform" rating on VNET and raised its target price to US$15.6, with a 29% upside. CICC maintained VNET's 2024 revenue/adjusted EBITDA unchanged, expecting the company's orders to continue to grow and its utilization rate to rise in 2025/2026, and raised its 2025 revenue/adjusted EBITDA by 3.2%/2.6% to Rmb9.04bn/2.6bn. It introduced Rmb10.31bn/3.01bn for 2026. CICC believes that the continuous progress of large models at home and abroad will bring about an increase in AI penetration, and computing power demand is expected to spiral upwards. The company will benefit from the AI-related demand, with its base business revenue growing rapidly in the second half of 2024, and its retail business cabinet utilization rate in core areas is expected to rise under the comprehensive impact of the continued improvement in downstream customer capital expenditure. Moreover, CICC said that as AI inference applications start to take off, the business's requirements for latency will rise, which is expected to promote demand to tilt toward first-tier and ring cities. This will drive the company's retail business cabinet utilization rate in core areas to rise, and the improvement in the supply-demand pattern is also expected to help stabilize and rebound in prices.