Morgan Stanley: Reiterates "Overweight" rating on VNET (VNET.US) with a significant price target hike to US$7.4.

Morgan Stanley recently released a research report to reiterate its "overweight" rating on VNET (VNET.US) and raised its target price from US$5.8 to US$7.4. Morgan Stanley raised its target price mainly driven by the following factors: the strong demand in the domestic market promoted by the AI investment of large-scale enterprises; the significant progress in the capitalization of base data centers, which will inject value-added assets into the Pre-REITs fund.Morgan Stanley said that the development of China's data center industry is further accelerating under the double drive of AI investment by large-scale enterprises and the recovery of traditional cloud business. VNET is one of the main beneficiaries of the transformation of data center deployment: the rapid increase in power density required for AI training has driven a structural shift in data center demand to remote areas in North China (mainly in northern Hebei, Shanxi and Inner Mongolia), which are relatively cold but rich in renewable energy. VNET's strategic resource portfolio built in advance is highly compatible with this demand. Therefore, Morgan Stanley believes that the company is likely to win more large orders in 2025.Morgan Stanley believes that VNET's valuation is still significantly undervalued. Even after the recent stock rebound, VNET's EV/EBITDA multiple based on 2025 expectations is 9 times, lower than the over 25 times valuation of global peers and about 20 times valuation of peers in Asia-Pacific, as well as its 10 times valuation of its data center Pre-REITs project.As of Tuesday's close of US stock trading, VNET's share price rose 12.5% to US$6.30.