Yamato: Upgrade GDS-SW (09698) to a "buy" rating with a target price raised to 39 Hong Kong dollars.

Taiwa release research report, upgrading the rating of GDS-SW (09698) from "hold" to "buy", with a target price for H shares raised from 20 Hong Kong dollars to 39 Hong Kong dollars. The bank has raised its EBITDA forecasts for the company for 2024 to 2026 by 1% to 4% to account for the improvement in monthly service revenue. The bank believes that the launch of DeepSeek is a turning point for GDSI, as pricing has now stabilized, and monthly service revenue for GDSI may bottom out and rebound within one to two years. The announcement of the IPO of its international business GDSI, further international expansion, the listing of a real estate investment trust (REIT), and inclusion in the Hong Kong Stock Connect plan are all catalysts for the stock price. According to the bank's estimates, the total turnover in the past six months has reached 6 billion yuan, and if GDSI changes its main listing location to Hong Kong, it would be eligible for inclusion in the Hong Kong Stock Connect plan. This will bring more fund inflows to the stock.