G Sachs Raises GDS-SW TP to HKD48, Expects Orders to Accelerate EBITDA Growth from 2H27
I'm LongbridgeAI, I can summarize articles.Goldman Sachs raised GDS Holdings' target price to HKD48 and maintained a Buy rating, citing strong AI and non-AI order demand. The broker expects EBITDA growth acceleration from H2 2027 as orders convert to revenue, despite potential 20-30% pricing drops on contract renewals reducing growth by ~2 ppts annually through 2028.
G Sachs said in a report that GDS-SW (09698.HK) -0.340 (-0.993%) Short selling $27.58M; Ratio 12.798% posted strong order performance in 2Q, with management mentioning during the earnings conference that both AI and non-AI demand remained healthy, enhancing visibility for EBITDA over the coming years. The broker expected the trend of accelerated earnings growth to become increasingly evident from 2H27 onward as orders are converted into revenue and EBITDA, which typically involves a 12- to 18-month lag from order signing to profit and loss recognition.
The broker estimated that adjusted EBITDA for GDS-SW (09698.HK) -0.340 (-0.993%) Short selling $27.58M; Ratio 12.798% 's China business will grow YoY by 8% and 19% in 2027 and 2028 respectively, excluding one-off items. To more accurately assess EBITDA expansion over the next three years, the broker split annual EBITDA changes into two key drivers. The first is EBITDA contribution from onboarding new customers, calculated based on management guidance of annualized EBITDA of RMB2.2 million per megawatt. The second is EBITDA loss arising from pricing adjustments upon renewal of existing contracts. Due to declines in market prices from 2021 to 2023, renewal prices may be 20% to 30% lower than original contract prices. The broker estimated that EBITDA losses from contract renewals will reduce adjusted EBITDA growth in 2026 to 2028 by around 2 ppts, 2.5 ppts and 1 ppt respectively.
G Sachs maintained its Buy rating on GDS-SW (09698.HK) -0.340 (-0.993%) Short selling $27.58M; Ratio 12.798% . Based on a sum-of-the-parts valuation method, the broker raised the TP for the US shares of GDS Holdings Limited (GDS.US) from USD46 to USD49, while the TP for the H shares was lifted from HKD45 to HKD48, mainly reflecting updated foreign exchange assumptions. Despite raising utilized capacity assumptions for 2027 to 2028 due to order ramp-up, the broker broadly maintained its adjusted EBITDA forecasts for 2026 to 2028, which remain 6% to 7% below market consensus.
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