Nomura: Lowers GDS target price to $45.7, strong order backlog provides long-term visibility.

Nomura issued a research report stating that GDS Holdings' second-quarter service revenue and adjusted EBITDA grew by 6.5% and 2.5% year-on-year respectively, broadly in line with market expectations. In the second quarter, 263 MW of new contracts were signed, bringing total orders in the first half to 471 MW. Management further raised this year's new booking target to 1 GW, and also expects customers to reserve an additional 1 GW of power capacity before the end of this year. The company raised its revenue guidance for this year to RMB 12.7 billion to RMB 13 billion, and also raised its adjusted EBITDA guidance to RMB 5.9 billion to RMB 6.1 billion, to reflect a one-off item in the first quarter. The bank raised its revenue forecasts for 2026 to 2028 by 1.4% to 4.7% to reflect stronger-than-expected order intake, and now estimates annual new commitments of 1 GW over those three years, with an additional 710 MW and 950 MW of customer move-ins factored in for 2027 and 2028. At the same time, due to a shift in market mix and the increased contribution of projects in new markets, the bank lowered its adjusted EBITDA margin forecasts for the same period by 1.8 to 3.7 percentage points, and cut its adjusted EBITDA forecasts by 2.6% to 6.8%. The bank reiterated its "Buy" rating on the company, but lowered its U.S.-listed target price from USD 48.4 to USD 45.7, based on an approximately 18.8x 2027 forecast EV/EBITDA, in line with the company's historical average.