Goldman Sachs Group, Inc. adds a new member to its "strong buy" list: VNET Group, Inc. Sponsored ADR (VNET.US) becomes the only company on the IDC list to undergo a transformation to a wholesale model, driving a reshaping of its valuation.

Goldman Sachs Group, Inc. recently released a research report, listing five companies including VNET Group, Inc. Sponsored ADR (VNET.US) on its "strong buy" list for the Asia-Pacific region. This makes VNET Group, Inc. Sponsored ADR the only IDC company selected for this list. Goldman Sachs analysts stated that VNET Group, Inc. Sponsored ADR is transitioning from a traditional retail IDC operator to a fast-growing wholesale IDC operator, benefiting from increasing AI investments. In the coming years, VNET Group, Inc. Sponsored ADR is expected to enter a phase of accelerated revenue and EBITDA growth, providing investors with potential investment opportunities. As a leading independent third-party data center operator in China, it is anticipated that around 75% of VNET Group, Inc. Sponsored ADR's revenue in 2025 will come from IDC business, with the remaining 25% coming from cloud computing and value-added services. Goldman Sachs Group, Inc. predicts that the compound annual growth rate of revenue and EBITDA in VNET Group, Inc. Sponsored ADR's wholesale IDC business will reach 52%-55% from 2024 to 2027. At the same time, the overall EBITDA profit margin of the company is expected to increase from 29.4% in 2024 to 33.3% in 2027. Regarding the market's concern about chip supply issues, Goldman Sachs Group, Inc. believes that Chinese cloud service providers are increasingly adopting multi-chip solutions and utilizing domestic GPUs for AI inference. Goldman Sachs Group, Inc. has accordingly raised the capital expenditure forecasts for Chinese cloud service providers. The report also points out that if NVIDIA Corporation's China-specific chips based on the Blackwell architecture are approved, the additional orders for VNET Group, Inc. Sponsored ADR in 2026 could be even stronger. In addition, Goldman Sachs Group, Inc. analysts expect that due to the rapid growth in AI demand, the reduction in dependence on foreign chips, and VNET Group, Inc. Sponsored ADR's rapid delivery capabilities and good track record in serving large AI customers, the volume of new orders for VNET Group, Inc. Sponsored ADR could significantly increase by the end of 2025 or early 2026, providing stronger support for capital expenditures and EBITDA prospects for 2026 and beyond. From a valuation perspective, VNET Group, Inc. Sponsored ADR's current stock price corresponds to a forward EV/EBITDA of approximately 10 times for the next 12 months, while Goldman Sachs Group, Inc. predicts a compound annual growth rate of 23% for EBITDA from 2024 to 2027. With new orders gradually materializing and the contribution of wholesale IDC business to revenue and EBITDA increasing, there is further room for valuation improvement for VNET Group, Inc. Sponsored ADR. Based on a 12 times forward EV/EBITDA for 2026, Goldman Sachs Group, Inc. gives VNET Group, Inc. Sponsored ADR a target price of $13 for the next 12 months.