Morgan Stanley: Raises VNET's (VNET.US) target price by 58% to USD11.7.

Morgan Stanley released a research report, maintaining its bullish view on China's IDC companies and raised the target price of VNET (VNET.US) by 58% to USD11.7. The expected EV/EBTIDA multiple of VNET in 2025 is 11.6x, which is still significantly different from the valuation levels of 24x in Asia-Pacific peers and 26x in global peers. The bank noted that the process of data center REITs funds has developed rapidly in the past three months. The funds not only provide sustainable domestic financing channels for data centers, helping them leverage existing assets to deleverage, but also provide funding support for capital expenditures in the AI era. In addition, the funds provide new valuation benchmarks for data center assets. The mature EV/EBITDA multiples of private REITs funds are 11-13x, while those of public REITs funds are 13-15x. Therefore, assets with high quality and growth potential should be given higher valuations. Looking ahead, Morgan Stanley expects the issuance of public REITs to gradually achieve in the second half of 2025 under the joint action of the continuous promotion of leading IDC companies, policy support, and China's low-interest environment. With the revaluation of similar assets such as industrial parks and warehouses in the C-REITs market, the public REITs of data centers are expected to be valued at 15x EV/EBITDA. At the same time, the bank said that the capital expenditure of Chinese hyper-scale enterprises grew strongly in 2024 and is expected to maintain a high growth rate in 2025. Among them, the capital expenditure of BAT is expected to grow by 10% YoY in 2025; while the overall capital expenditure is expected to grow by 30%-40% YoY, consistent with the growth trend in the United States. In the optimistic scenario, assuming that the capital expenditure intensity of other hyper-scale enterprises is equivalent to that of ByteDance, it will reverse the supply and demand relationship of data centers and drive up the rental prices in the next few quarters.