My score for Chindata Group Holdings Restricted’s (NASDAQ:CD) shares is a Purchase.
I reviewed CD’s monetary efficiency for the second quarter of this 12 months with my earlier article for Chindata written on September 1, 2022. I flip my consideration to Chindata’s most up-to-date Q3 2022 monetary outcomes in my newest write-up.
Each CD’s prime line and backside line surpassed the market’s expectations, and this gave the corporate confidence to boost its monetary steering for this 12 months. Individually, there appears to be a fairly good probability of Chindata receiving a privatization supply someday down the highway, considering media reviews and CD’s present valuations. Taking the above-mentioned elements into consideration, I flip optimistic on Chindata and price it as a Purchase.
Earnings Beat For Q3 2022
Chindata delivered above-expectations earnings for the third quarter of 2022. In USD phrases, CD’s non-GAAP adjusted earnings per share or EPS elevated from $0.02 in Q3 2021 and $0.05 in Q2 2022 to $0.06 for Q3 2022. The corporate’s precise third quarter non-GAAP EPS beat the sell-side analysts’ consensus forecast by +5%.
The Q3 2022 earnings beat for Chindata was pushed by each sturdy prime line development and an enchancment in profitability as detailed within the subsequent sections of this text.
Robust Income Progress
In native foreign money phrases, income for Chindata expanded by +62% YoY from RMB741 million within the third quarter of 2021 to RMB1,203 million for the latest quarter. CD’s Q3 2022 prime line additionally turned out to be +8% higher than the market’s consensus prime line estimate of RMB1,119 million based on knowledge taken from S&P Capital IQ.
The rise in capability was the highest line development driver for CD in the newest quarter. Chindata’s in-service capability went up by +56% YoY from 370MW in Q3 2021 to 579MW for Q3 2022. Throughout the identical interval, the corporate’s utilized capability grew by +69% from 268MW to 454MW.
Improved Working Revenue Margins
CD’s non-GAAP adjusted EBITDA margin widened by +140 foundation factors YoY from 49.7% for Q3 2021 to 51.1% in Q3 2022.
The enlargement in Chindata’s adjusted EBITDA margin and development in its income led the corporate to realize a +67% YoY bounce in non-GAAP EBITDA to RMB615 million in native foreign money phrases for the newest quarter.
It’s also noteworthy that CD’s precise Q3 2022 adjusted EBITDA was +12% higher than the analysts’ consensus EBITDA projection of RMB549 million as per S&P Capital IQ knowledge.
In my prior September 2022 article for Chindata, I famous that CD’s “anchor shopper”, ByteDance (BDNCE) was “the driving power for Chindata’s robust development in Q2 2022.” ByteDance continued to be a significant factor influencing Chindata’s monetary efficiency for the third quarter of this 12 months.
Chindata disclosed in its Q3 2022 earnings presentation slides that the expansion in its in-service capability for the latest quarter was largely supported by two of ByteDance’s knowledge facilities with an combination capability of 48MW getting into into service. Trying ahead, the corporate’s Indication Of Curiosity or IOI capability elevated by 38MW on account of ByteDance’s “mission CN20 within the campus in Shanxi Province” as highlighted in its third quarter outcomes presentation.
Quick-Time period Outlook Is Fairly Good
I’ve a positive view of Chindata’s prospects within the very close to time period. On the again of better-than-expected monetary outcomes for the third quarter of 2022, CD raised its monetary steering for full-year FY 2022.
Particularly, the mid-point of Chindata’s 2022 prime line steering was elevated by +5% from RMB4,180 million beforehand to RMB4,380 million. CD’s non-GAAP adjusted EBITDA estimate for this 12 months was additionally revised upwards by +4% from RMB2,140 million earlier to RMB2,230 million at the moment based mostly on the mid-point of its steering.
In different phrases, administration sees Chindata’s income and adjusted EBITDA rising by +54% and +57%, respectively for full-year fiscal 2022. As such, it’s cheap to conclude that the short-term outlook for CD is sweet.
Primarily based on valuation knowledge obtained from S&P Capital IQ, Chindata’s consensus ahead subsequent twelve months’ EV/EBITDA a number of has derated from 13.5 occasions a 12 months in the past to 7.7 occasions now. Up to now one 12 months, CD’s consensus ahead subsequent twelve months’ Enterprise Worth-to-Income metric has additionally compressed from 6.0 occasions to 4.0 occasions.
Bearing in mind the inventory’s valuation de-rating in latest occasions, Chindata’s valuations may need acquired to ranges which can be sufficiently engaging for a possible privatization to happen. Current media reviews help this line of argument.
On September 21, 2022, In search of Alpha Information reported that Chindata “employed an adviser to contemplate potential asset gross sales or a take non-public.” One other more moderen In search of Alpha Information article revealed on November 2, 2022 famous there are reviews claiming that VNET Group (VNET), one among CD’s friends, has a “$8.20/share take non-public supply.”
In a nutshell, the chance of Chindata being privatized has elevated, contemplating its present valuations and up to date information circulate.
I improve my score for Chindata from a Maintain to a Purchase. I’ve turn into extra optimistic on CD, as I believe its near-term outlook is sweet and there’s a first rate probability of a privatization occurring in the end.