VNET: Private REIT Capital Recycling Will Support Future AI Data Center Expansion

Analysts have inched their fair value target for VNET Group higher, from approximately $14.45 to about $14.69 per share, citing slightly stronger revenue growth expectations that more than offset a modest trim to projected profit margins and a higher future earnings multiple.

What's in the News

• Raised full year 2025 earnings guidance, now targeting total net revenues of RMB 9,550 million to RMB 9,867 million, implying 16% to 19% year over year growth (company guidance).
• Completed issuance of a holding type real estate green asset backed security under a newly launched private REIT. This is the first of its kind in China's IDC industry and will be listed on the Shanghai Stock Exchange (company announcement).
• Plans to transfer 100% equity in a retail IDC project into the private REIT. Of this, 93% is subscribed by leading domestic institutional investors such as China Pacific Insurance Group and 7% by VNET, for a total offering size of about RMB 860 million and a valuation of roughly 13x EV/EBITDA (company announcement).
• Expects the Private REIT Project to help recycle capital for capacity expansion and general corporate purposes, while lowering leverage and optimizing its capital structure. VNET will remain the operator of the underlying premium tier one city data center (company announcement).

Valuation Changes

• Fair Value Target has risen slightly, from approximately $14.45 to about $14.69 per share.
• Discount Rate is unchanged, remaining at 13.76%.
• Revenue Growth assumption has increased marginally, from about 16.40% to roughly 16.45%.
• Net Profit Margin forecast has inched down slightly, from around 4.33% to about 4.29%.
• Future P/E multiple has risen modestly, from roughly 62.2x to about 63.5x.