Morgan Stanley: Reaffirms "overweight" rating on VNET Group, Inc. Sponsored ADR(VNET.US) and significantly raises price target to $7.4.

Morgan Stanley recently released a research report, reiterating its "overweight" rating on VNET Group, Inc. Sponsored ADR (VNET.US), with a target price raised from $5.8 to $7.4. Morgan Stanley's target price adjustment is primarily driven by the following factors: the investment in artificial intelligence (AI) by ultra-large-scale enterprise clients has promoted strong demand in the domestic market; capitalization of base data centers has made significant progress, injecting value-added assets into Pre-REITs funds. Morgan Stanley stated that with the dual drivers of ultra-large-scale enterprise clients' AI investments and the recovery of traditional cloud business, China's data center industry is further accelerating its development. VNET Group, Inc. Sponsored ADR is the primary beneficiary of the transformation of data center deployments: the rapid increase in power density required for AI training has driven a structural shift in data center demand towards the northern remote areas of China (mainly in northern Hebei, Shanxi, and Inner Mongolia), where the climate is relatively cold and renewable energy is abundant. The strategic resource portfolio constructed by VNET Group, Inc. Sponsored ADR in the early stage is highly in line with this demand. Therefore, Morgan Stanley believes that the company is expected to secure more large orders by 2025. Morgan Stanley believes that the valuation of VNET Group, Inc. Sponsored ADR is still severely undervalued. Even after the recent stock price rebound, VNET Group, Inc. Sponsored ADR's EV/EBITDA multiple based on 2025 expectations is 9 times, still lower than the global industry average of over 25 times and the Asia-Pacific industry average of about 20 times, and also lower than the 10 times valuation of its data center Pre-REITs project. As of the close of the U.S. stock market on Tuesday, VNET Group, Inc. Sponsored ADR's stock price rose by 12.5% to $6.30.