21Vianet's Rating Upgraded by Moody's on Strong IDC Demand

Moodys has upgraded the corporate family rating (CFR) of 21Vianet Group Inc. from B3 to B2, reflecting the company's strong position in China's internet data center (IDC) market. The upgrade is driven by the robust demand for data center capacity in China, as the country accelerates the application of artificial intelligence tools. 21Vianet is expected to benefit from this trend as it continues to expand its wholesale IDC business.

Shawn Xiong, a senior analyst at Moodys, stated that the rating upgrade is a result of 21Vianet's continuous expansion in its wholesale IDC business, which is well-positioned to capitalize on the strong demand for data center capacity in China. The company's strategic partnership with its major shareholder, Sheng Hong Holdings, is expected to drive revenue and profit growth in the next 12-18 months. The stable rating outlook indicates Moodys' expectation that 21Vianet will successfully execute its capital expenditure plans while maintaining stable profit margins, good financing channels, and sufficient liquidity.

Moodys anticipates that 21Vianet's total revenue will grow by 15%-20% in the next 12-18 months, primarily due to the increase in new wholesale IDC capacity and the higher utilization rate of existing capacity. The utilization rate of wholesale IDC is expected to rise from 66% at the end of 2023 to 73% by the end of 2024, while the utilization rate of retail IDC will remain stable at 64% during the same period.

Moodys also predicts that 21Vianet's EBITDA profit margin, as adjusted by Moodys, will increase from 37% in 2024 to 40%-45% in the next 12-18 months. This increase is due to the higher profitability of the wholesale IDC business, which will drive the overall profit margin. In 2024, the revenue contribution of the wholesale IDC business is expected to increase significantly, accounting for 24% of the company's total revenue, up from 14% in 2023.

21Vianet's liquidity remains robust. By the end of 2024, the company is expected to have a cash balance of 15 billion yuan, along with projected annual operating cash flow and project financing. This will be sufficient to cover its planned capital expenditures and debt maturities in the next 12-18 months. Additionally, the successful recovery of approximately 12 billion yuan from a pre-REITs fund established with a Chinese insurance company will further bolster the company's liquidity.

This rating upgrade by Moodys not only acknowledges 21Vianet's past achievements but also serves as a vote of confidence in its future development. As the digital economy continues to thrive, 21Vianet is poised to leverage its strengths and seize market opportunities. The company will continue to deepen its presence in the data center sector, providing high-quality services to customers and contributing to the industry's growth. This will ultimately create greater value for its shareholders.