The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that AI computing power demand is driving the IDC industry into a new upward cycle, and companies that have completed resource and capacity layout early will fully benefit. Demand for AI training and inference continues to grow, and cloud vendors increase capital expenditure to release demand for high power density data centers. The bank believes that the scale and sustainability of this cycle is expected to surpass the previous two rounds, and companies with resource reserves, delivery capabilities and cost advantages will benefit more fully.
Cathay Pacific Haitong's main views are as follows:
Reviewing the two cycles of cloud computing and new infrastructure, the scale and sustainability of this round of upward trend will increase
The cloud computing cycle (2013-2015) and the new infrastructure cycle (2018-2021) are both driven by CSP short-term centralized construction, and the industry is digested by stocks after demand is met. This round of demand is driven by the capital expenditure of intelligent computing power from large manufacturers. Reasoning computing power continues to occur with the penetration of AI applications. The focus of demand shifts from large-scale training to equal emphasis on training and reasoning. Combined with CapEx from major domestic companies, it is clearly skewed towards AI, and the penetration of enterprise AI applications into traditional industries has further broadened the source of demand. On the supply side, high-power cabinets require simultaneous adaptation of power supply, cooling, and interconnection. Low-density computer rooms are difficult to directly handle. The digestion of old production capacity goes hand in hand with the shortage of new production capacity, lengthening the duration of this cycle.
Price recovery or lag behind the recovery in demand, and the power cost advantage supports profits
Increased customer concentration enhances buyers' bargaining power, compounded by loose supply in the early stages, making it difficult for IDC prices to rise rapidly and drastically in the short term; this round of profit improvement is more dependent on matching orders, delivery, and listing. The key to profit is actual billing capacity and billing time. IDC accounts for a relatively high fixed cost, and variable costs are mainly electricity costs. PUE requirements continue to rise. Cost advantages in low electricity price regions such as Ulanqab and Qingyang in Gansu are outstanding. Cooperation between source network load storage and green power is expected to further reduce electricity costs, and IDC companies with high listing rates still have plenty of profit room.
Early resource and capacity reserves determine the ability to handle this round of demand, and the fourth quarter valuation switch provides a layout window
Land, energy consumption, and external power supplies are difficult to complete in the short term. Companies that complete resource reserves and main construction ahead of schedule at the end of the cycle can quickly advance mechanical and electrical configuration after the order is landed to better match customer delivery needs. As prefabricated construction shortens the delivery cycle, the early layout is expected to accelerate transformation into billing capacity and operating income. IDC is an asset-heavy industry. The valuation can focus on EV/EBITDA, and determine profit contributions based on project delivery, listing rate, and actual billing month. Market pricing gradually changed in the fourth quarter to the following year. Delivery of projects under construction and listing of existing cabinets are expected to drive EBITDA growth, and performance implementation and valuation changes will jointly increase sector allocation value.
Risk warning: 1) Downstream demand falls short of expectations, and price competition intensifies; 2) Delivery billing and cost recovery efficiency falls short of expectations; 3) The benefits of capital bridging and transaction integration fall short of expectations.