This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk11: Good morning and good evening, ladies and gentlemen. Thank you and welcome to the Chin Data Group Holdings Limited Second Quarter 2022 Earnings Conference Call. We will be hosting our question and answer session after management's prepared remarks. Please note that today's conference is being recorded. I would now like to turn over to the first speaker for today, Mr. Dan Zhou from Investor Relations of Chin Data Group. Please go ahead, John.
spk07: Thank you, Alfredo. Hello, everyone. Welcome to Trignator Group's 2022 Second Quarter and Half-Year Earnings Conference Call. This is Don from the Investor Relations Team of the company. With us today are Mr. Ha Feng Wu, our CEO, Mr. Nick Wong, our CFO, Ms. Zoe Zhang, our Finance VP, and Ms. Joy Zhang, our General Counsel. During this call, Nick will take you through the quarterly review of our operation performance, and Zoe will present our financial results. Management team will be here to answer your questions afterwards. Now I'll quickly go over the safe harbor. Some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the risk factors discussed in our findings with the SEC. During this call, we'll present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in our earnings press release, which is distributed and available to the public through our investor relations website located at investor.chainedatagroup.com. We have also updated our quarterly presentation on the company's investor relations website, which you can refer to as a supplementary material for today's call. Without further ado, I'll now turn over the call to Nick. Nick, please go ahead.
spk03: Thank you, Dong. Hello, everyone, and thank you for joining the call. During the second quarter, our business continued to grow in a healthy manner. Let's take a look at some key highlights first, and we will share more lights on details afterwards. On slide four, by end of the second quarter, Our total capacity expanded to 776 megawatts, an increase of 72 megawatts during the quarter, thanks to the inclusion of two new under construction projects. We now have a total of 30 data centers in our asset portfolio. We put one project into service, bringing our total in-service capacity to 511 megawatts, which is an increase of 13 megawatts. We continue to see healthy demand from our clients as our total contracted and the indication of interest capacity increased by 32 megawatts during the quarter to 619 megawatts, leading to still a healthy commitment rate for our total capacity at 84%. Ramp-up remained strongly on track as another 57 megawatts was put into utilization in quarter. bringing our total utilized capacity to 401 megawatts and a solid utilization rate of 78%. Our capacity buildup effort is constant as we now have a total of about 361 approved and pending patents by end of the quarter, compared with 256 in the same quarter last year. Meanwhile, recently in July, the company released a new waterless cooling technology jointly with our partner. And we will go into details of that later. Financially, our top and bottom line remains strong and healthy. We believe we have delivered upbeat revenue and adjusted EBITDA results for eight straight quarters since IPO. Revenue was RMB $1,000. 38.1 million for the quarter, which is 51.2% year-over-year growth. Adjusted EBITDA was RMB 544.3 million, a 60.8% year-over-year growth, with a margin of 52.4%. GAAP net income was RMB 199.6 million for the quarter, which is the 206.3% year-over-year growth. with a historical high margin of 19.2%. Our 500 million USD syndication loan was officially closed in later June, bringing the company necessary financing for further extension. Meanwhile, credit agencies have also reconfirmed our ratings, with Fitch reaffirming our BBB minus rating investment rate with a stable outlook. And Moody's reaffirmed our rating as BA2 with a stable outlook. Now, let's go to the details of quarterly performance. I would like to bring your attention first to our client commitment dynamics in the first quarter, in the second quarter. During the second quarter, we received an additional 32 megawatts commitment from our client, including both new contract as well as new indication of interest. From our perspective, our general client base, in particular our anchor client's business, remains very healthy. A total of 45 megawatts of IOI capacity on project CN09, CN11C, and CN14 for the anchor client was fully converted into contracted capacity in the quarter. Well, another 30 megawatts capacity was also contracted in a quarter on product CN18 to support the anchor client. With these, the aforementioned four projects for the anchor clients are now 100% contracted. In addition to our anchor clients, we have also received a three megawatts indication of interest on project CE01 in Yangtze River Delta region. to support one of our key international clients. With these changes, the commitment status of our asset portfolio continue to look very healthy. On slide eight, we have a 95% contracted and IOI ratio for our in-service capacity, a similar level compared to that of the previous quarter. On slide nine, for our total capacity, the contracted and IOI ratio by quarter end was 84%, compared with 88% in the previous quarter. The inclusion of the two new under construction projects, which are currently under discussion with potential clients on demand details, brought some dilution to the figure, but essentially the commitment status for our total asset portfolio is generally healthy. For your further reference, By end of the second quarter, over 90% of our contracts are 10 years contract. Well, the weighted average remaining terms of our contracted megawatts is around eight years, or to be specific, 8.26 years. Now, let's look at our delivery schedule starting from slide 10. We have put one project in service in the quarter. which is a 13 megawatt hyperscale leased project that supports the business of the Chinese cloud service provider Clive in their campus in Tianjin. We also added two new under construction projects into our asset portfolio with a total capacity of 73 megawatts. These two hyperscale projects are located in our Hebei and Shanxi campus respectively, each with a capacity of 26 megawatts and 47 megawatts. and are scheduled for delivery in 2023. These projects are expected to support our existing client, and the demand details are currently under discussion. Looking at our delivery schedule on slide 11, we now have a total end of construction capacity of 265 megawatts by end of the second quarter, among which 93 megawatts are expected to be delivered in year 2022. and another 172 megawatts to be delivered in year 2023. Our India project, which is BBY01, was slightly delayed into the third quarter this year, while we expect other projects to stay in line with their original schedule. You can refer to the slides 12 and 13 for the design profile of some of our selected end-of-construction projects. Coming to customer move-in on slide 14. Thanks to our client's excellent and resilient business performance, we are able to keep a steady and healthy ramp-up pace. We added 57 megawatts of utilized capacity in the second quarter, bringing our total utilized capacity to 401 megawatts, compared with 251 megawatts in the same quarter last year, which is a 59.6% year-over-year growth and 16.6% quarter-over-quarter increase. Additional move-in was mostly contributed by project in our Northern China Shanxi and Hefei campus, supporting the anchor client, as well as in client campus in Tianjin, supporting one of the Chinese cloud service provider clients, and in our Malaysia campus, supporting one of the key international clients. With this steady ramp-up, Our utilization ratio by end of the second quarter remained very healthy, standing at 78% compared with 69% in the previous quarter, and an average of 71% since the listing of the company. With the quarterly dynamics mentioned above, now let's take a general look at our capacity geographically. By the end of the second quarter, Our APAC emerging market capacity deployment now accounts for around 15% of our total capacity. Well, 89% of these capacity in APAC emerging market is committed by clients. For the current end of construction capacity, 36 of them rest in APAC emerging market and more than half of them reside in greater Beijing area. Again, showcasing our advanced layout in and committed commitment to the APEC emerging market, as well as our further effort in strengthening our foothold in our key existing campus in China under the East Data West Computation Policy. We will also like to share some other key recent development of the company. As set forth by the management team previously, the company will formulate further game plan around East Data West Computation Policy. to further strengthen our foothold in our existing campus in key HUB regions of the policy, while at the same time, through leveraging our differentiated advantage in technology and with the effort of building a business partnership ecosystem to gain access to more business opportunity in new key HUB regions under the policy. The game plan is gradually working. In terms of further strengthening our foothold in existing campus, on slide 19, the company recently entered into agreement with local government in Datong, Shanxi Province on August 19th to further expand our existing capacity in the Datong campus. According to such, the company will build up a total of over 500 megawatts capacity in our existing Datong campus going forward. which is around two times our existing capacity in the region. Once completed, the campus is expected to become the single largest IDC campus in the entire Asia. On July 27th, on slide 20, the company entered into strategic cooperation with Taiji Computer Co. Limited, one of the leading player in e-environment, smart city, and industrial internet in China. We have established a cooperation relationship with Taiji back in the year 2017 when the company was working on its Beijing project CN02. We believe such strategic cooperation has brought more vitality to the company's existing business ecosystem. And together with the partner, we seek to better utilize the differentiated advantage of each party to expand service to more potential industry customers under the new national policy. The company also remains very committed to innovation, research, and development to drive growth of a high-quality business. On slide 21, we have recently come up with more technical alternatives for data center industry to better accommodate their energy performance to diversify natural conditions in different regions, so as to achieve improved resource consumption of data center. On July 29, the company and its technical partner, Vertiv Technology, jointly released a new waterless cooling technology, X-Cooling. The solution, with the integration of control and sensing technology, makes cooling system capable of automatically adjusting itself to variables such as outdoors environment, workload, various operation modes, so as to run with optimized energy and water efficiency performance. Under the testing in the company's data center in Hebei province, the solution yielded a PUE performance of less than 1.1. and the wue or water utilization efficiency performance of zero indicating a potential save of 1.2 million tons of water per year for a 100 megawatts data center in a real world scenario such solution has offered favorable evidence for massive application of the solution going forward on financing The company's $500 million syndication loan was officially closed in late June, which is offering more resource for our capacity expansion going forward. At the same time, Fitch and Moody's have all reaffirmed their existing credit rating for the company, with Fitch reaffirming its investment grade BBB minus with stable outlook, and Moody's reaffirming its BA2 with stable outlook. We believe this reaffirmation of our credit rating has kept all options for the company should we decide on future financing activities, therefore safeguarding our business development. With these, I have concluded my part of business update, and I will now turn over to Zoe for details in our financial performance. Zoe, please.
spk10: Thank you, Nick. Now, let me walk you through our quarterly financial performance. Our financials remain on a healthy momentum. On slide 23, revenue in the second quarter increased by 51.2% year-over-year, or 12.8% quarter-over-quarter, to reach RMB $1,038.1 million, which is in line with our steady ramp-up. Looking further down, on slide 24, Total cost of revenue in the second quarter increased by 47.7% to RMB 602.2 million from RMB 407.6 million in the same period of 2021, mainly driven by increases in utility costs and depreciation and amortization expenses. Selling and market expenses in the second quarter of 2022 decreased by 33.5% year-over-year to RMB 15.4 million, primarily due to less share-based compensation expenses as well as less marketing activity as the company went through an almost one-month long work-from-home mode in Beijing during the month of May due to citywide COVID-19-related administration. General administrative expenses in the second quarter of 2022 increased by 5.3% year-over-year to RMB 91.1 million, primarily due to the increased personnel cost as the company grew its business. With this, operating income in the second quarter of 2022 increased by 109.2% year-over-year to RMB 310 million, with a margin of 29.9%. Net income in the second quarter of 2022 increased by 206.3% year-over-year to RMB 199.6 million, with a historically high net margin of 19.2%. For further breakdown of core cost and expense items on slide 25, regarding utility costs, we experienced a similar cost level during the second quarter as the first quarter, as indicated by the similar revenue percentage that we see. For maintenance and other costs, due to the recognition of one-off service that we provided to our customer in the quarter, we are seeing an increase in this cost item, excluding this specific other item, our maintenance at other cost intensity is generally in line with our past performance. Adjusted SG&A also slightly decreased on both year-over-year and quarter-over-quarter basis due to the reasons that we just introduced. With this, on slide 24, our NANGAP profitability remained healthy. Adjusted EBITDA in the second quarter of 2022 increased by 68.8% to RMB 544.3 million from RMB 338.5 million in the same period of 2021. Adjusted EBITDA margin in the second quarter was 52.4%, slightly lower than the previous quarter. Adjusted net income increased by 114.1% year-over-year to RMB 241.9 million, hitting a historically high margin at 23.3%. Details in our GAAP to NAND GAAP reconciliation on EBITDA and net income could be available in our 6K filing or the appendix in our IRPPT. Now, let's take a look at our cash and debt position and our CAPEX on slide 27. We continue to work in our business expansion to meet the increasing demand from our customers by investing more capital into our under construction data centers. CAPEX in the second quarter was RMB 1,007.8 million and the CAPEX in the first half of 2022 added up to RMB 2,232.7 million. As we have successfully closed the syndication loan, we are seeing our cash and debt position both went up to RMB 5,763.9 million and RMB 7,460.8 million by end of second quarter respectively. Ending up in the net debt position of RMB 1,758.8 million. Cash dynamics during the quarter was contributed by a net operating cash flow of RMB 475.5 million, net financing cash flow of RMB 1,819.7 million, offset by RMB 974.8 million investing cash outflow. Now, Let's take a look at some key leverage and coverage ratios on slide 29. By end of the quarter, with the close of the syndication loan, our total debt-to-capital ratio increased to 41.6% compared to 35% in the previous quarter. Debt-to-EBITDA-related ratio also went up, while the interest coverage ratio continued to improve. with last 12 months adjusted EBITDA to interest ratio went up to from 6.1 to 6.7. With the above and take into consideration of relative factors, we are reiterating our 2022 full-year revenue and adjusted EBITDA guidance. By the end of the second quarter, our half-year revenue and adjusted EBITDA is around 47%. to 49% of our full-year guidance by midpoint. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.
spk11: As a reminder, to ask a question, you will need to slowly press star 1 and then 1 on your telephone and wait for your name to be announced. Once again, it's star 1 and then 1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. This will take a few moments. When asking the question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone in the call. And please ask one question at a time. Thank you.
spk02: We are going to proceed with the first question.
spk11: We have the first question coming from the line of Yang Liu from Morgan Stanley. Please ask your question. .
spk01: My question is regarding the utilization rate ramp-up. We understand that most of the data center chain data builds have a customer commitment of moving to a mature stage within nine months. But actually, the ramp-up speed is faster than that. And what is the outlook for this speed? Should we expect some normalization, or should we expect this fast speed to sustain going into the second half of this year? Thank you.
spk03: Thank you, Liu Yang. I think I can answer this question in a quick manner. I think the accelerated or faster moving reflect the strong business demand from our customers and also show that their momentum of business is going really, really strong. But the company style, our company style is really conservative. So moving forward, we still put roughly on average nine months of moving rate into our entire forecast. Thank you.
spk02: Thank you. We are going to proceed with the next question. Please stand by.
spk11: The next questions come from the line of Tina Hu from Goldman Sachs. Please ask a question. Your line is open.
spk10: Then I have two questions here. The first is that I want to know, in fact, we are in the Southeast Asian market, because there are several different campuses in Malaysia and India. So I want to see if there are any relatively abundant potential customers besides our main big customers here. Okay, I'll translate my questions. So the first one is regarding the ASEAN market, because we see that Qindata has already had several campuses Malaysia as well as in India so wondering besides our anchor customer is there any other potential customers with pretty significant demand that we are in the progress of like trying to win orders and also in terms of the competitive landscape in the ASEAN market who are some of the other data center companies globally that have already had some footprint or are preparing to enter this market. And then the second question is regarding the strategic partnership with Taiji Computer. Wondering if there is any quantitative target from this partnership, any several number of projects already under discussion. If there is any quantitative target we can get, that would be very helpful. Thank you.
spk03: Thank you, Tina. I think for the overseas related question, I can answer that. And I'm going to refer to your second part of the questions to our CEO, Mr. Wu Hapeng. So starting to answer your first questions about your Southeast Asia market, we have a very, very bullish view about the opportunity in the Southeast Asia market potentially in the foreseeable future. We think that the demand and supply actually will be pretty balanced. And I think the oversupply situation you see currently in China may happen some years later. And also that I think the fast-growing digital economy driven by the population, by the economy growth will drive up the hyperscale data standard demand from all major global internet and high-tech players. and on top of the Chinese Internet companies going to that region. And we have every confidence that we'll become the key, I think, hyperscale leader in the marketplace. And all these international Internet high-tech players will become our key targeted customers as well, on top of all these domestic customers going to the region as we currently have. As a matter of fact, Chindata has set up a clear growth strategy in Southeast Asian market two years ago, much earlier than anybody else. As of the second quarter of this year, as we repetitively introduced, we already have about 117 megawatts capacity, either in service or under construction in the region in reality. A significant portion are used to serve international customers such as Microsoft and Google. And we are in the process of landing more capacity with international customers, which we will do proper disclosure in a proper manner in the near future. Now, I'm going to refer the second part of the question to our CEO, Mr. Wu Huapeng.
spk08: Mr. Wu, please. Our cooperation with TSMC is to make use of our own data We have a lot of experience in the field of technical innovation and long-term optimization. Taiji is facing positive customers in the Chinese market. Customer service capacity has its advantages. This is a starting point for both parties to cooperate. At present, both parties have made some progress in some of the collective projects after signing, but there will be real progress. Translation for Hua Peng's words. Our collaboration with Taiji has
spk05: taking each other's advantage and promoted to the biggest edge. For our company, we are very long at technology innovation, data center construction and operation. And for Taiji, in China, their clientele are mostly focused on the governmental, smart city, et cetera. So this becomes our basis or foundation for our collaboration. Currently, we are having some specific project in discussion, and we will report the progress to the market when it comes to you. We do set up a frequent, periodical communication system, and we believe this communication system and also the intercollaboration will take us to a further, longer win-win situation.
spk10: Thank you. Yeah, I'll just get back into the queue for another question. Thanks.
spk11: We are going to proceed with the next question. We have the next questions coming from the line of Mingren Li from CICC. Please ask your question. Your line is open.
spk04: The first question is about the expansion agreement signed with Shansi Datong in August. In the future, the remote IT capacity may be more than 500MW. How do we expect the development of the future project? And how is the customer demand in that area? My second question is about the electricity bill. I want to ask how the company looks forward to the future of these major areas, such as the change in electricity bills in Hebei and Shansi. I will translate my question. Hi, Matt. Thanks for your time. And I have two questions here. My first question is regarding the expansion plan of campus in Datou. And the total IT capacity expected to reach 500 megawatts going forward. So can you give us more color about the delivery schedule and the demand profile here? And my second question is regarding the utility costs. Can you share more detail about the future trends of utility costs in different campus like Hebei and Shaanxi? Thanks.
spk03: Thank you. For the first question, I will invite our CEO, Hua Peng, to answer. And I believe Zoe is going to answer a question about the original power tariff issues. Please go ahead, Mr. Wu.
spk08: Translation for Hua Peng's words. Our agreement with Datong government was a prepositive gesture of mutual understanding on future collaboration.
spk05: We aim to secure the resources for future development in the area through this effort.
spk08: And the Datong City is also, as its own government efforts, applying for the second batch key experimental point
spk05: under the East Data West Compute National Policy.
spk08: On the demand side,
spk05: As a general practice, we have been communicating with our clients at every critical point along the project development process. We'd expect our projects in Datong will continuously support the needs of our key clients and other potential ones.
spk10: Okay, so I will take your second question. As we all know that recently some regions in China, for example, East or South part of China, there is a power supply shortage. Well, you know that Chin Data's data centers are mainly located in areas with a resource supply very sufficient, so that the power supply of the company's main campus are relatively adequate. And also since July, we noticed a certain degree of utility cost increase in some areas due to the power policy adjustment. among part of our campuses. For this part, we have considered the potential impact already in the previous quarter release, the four-year guidance. And also meanwhile, the company has taken some initiatives to optimize the data center power design and structure, which aims to hedge some utility cost increase to a certain extent. So all in all, You know, although we have outbid market consensus for the first half of this year, but the companies still maintain the four-year revenue and adjusted EBITDA guidance range not changed in a very prudent way. Thank you. Thank you, Miraclea.
spk11: We are going to proceed with the next question. The next questions come from the line of Sarah Wang from UBS. Please ask your question. Your line is open.
spk09: Thank you for your question. I would like to ask about the industrial park in Datong. I heard from the management that it will be the largest in Asia after it is completed. So I would like to ask about the digital center park in Datong City Government. When will it be completed? And I would also like to ask the management Let me translate myself. I understand that the IDC campus to be built in Datong will be one of the largest in Asia. So just wondering, if TeamData has any agreement with Datong government, and when do we expect the completion of this IDC campus? And my second question, the quick one, is there any update on our Hong Kong listing plan? Thank you.
spk03: Thank you, Sarah. I think if I'm going to keep answering the questions related to Datong, I'll address the question on second and third.
spk08: Let me make it simple. By the end of 2025, our IT capacity will exceed 500 megawatts. We are currently developing several projects that will be delivered this year and next year. By 2025, we will reach 500 megawatts. The 500 megawatts capacity should be within a single area. We believe that a single area can reach the largest in Asia. This is our judgment. To your first question, we estimated that by the end of 2025, our Datong campus will have a total capacity of over 500 members.
spk05: in the same campus under construction, and they will be delivered annually for this year and next year gradually. We estimated that for a single, counted by a single campus, it will be the largest in Asia. Thank you.
spk03: On the CapEx related questions, it's pretty simple and straightforward. I think as we previously communicated to Mark yet, This year, we forecast to spend the CapEx in a range of around 4.5 billion RMB. And moving forward, given that the very strong pipeline project CapEx needs, we forecast for the foreseeable future, the CapEx spending is going to be in the same range, between 4 to 4.5 billion RMB. So, and your third question is regarding our Hong Kong listing. There is some progress. First of all, there have been a very strong consensus among the company management, the board, and our key shareholders that the Hong Kong listing itself will bring clear benefit to all stakeholders concerned, especially it can effectively mitigate potential delisting risk uh brought by this uh potential uh act of uh holds foreign council accountable as legislation against the chinese companies listed in u.s uh but we have a pretty positive view about the development of this legislation and our current assessment is that this hfcaa legislation is more than likely to be effective in 2024 instead of 2023 and the acceleration scenario and also the latest development, what we heard from the market is that there is also a big chance that US and China government can reach an agreement later this year. But nevertheless, we still think that we should start the internal process now, including setting up internal task force, performing some pre-A1 consultation, and also further assessment of some listing options. For example, primary or secondary listing or by offering or by introduction method and we also in the process of uh in the preparation of a preliminary documentation and data room as well so if everything goes as as uh our currently expected uh the external work stream may start in as early as october And we will then work with external parties to do proper preparation for external A1 filings, potentially in Q1 2023. And after we submit A1 and pass the hearing of Hong Kong SEC, the listing will more than likely take place in early April 2023. Obviously, all this kickoff of the external workstream to filing, to listing,
spk11: uh requires the authorization from our board and we will make proper disclosure to the market once we reach that stage hope i can answer your question on this thank you we are going to proceed with the next question the next questions come from the line of edison lee from jeffries please ask a question your line is open
spk06: Okay, thank you for the opportunity. I have some financial questions. The first one is about electricity bills. Because I saw that in the second quarter, the rise in electricity bills is actually higher than the rise in your income. So I would like to ask, in the next few quarters, do you think that the ratio of electricity bills to income will continue to rise? And what are the following driving factors? I have two questions. The first one is about power cost. And I found that in the second quarter of this year, your power cost actually grew faster than your revenue. So I want to know for the next few quarters, what is the outlook? And number two is on the tax rate, because I think that in the second quarter, your tax rate is lower than the second quarter last year, as well as the first quarter of this year. So I want to know what kind of drivers are behind this tax rate volatility. Thank you.
spk03: Thank you, Edison. I'm going to refer to my colleague, Zoe Zhuang, to answer your two questions.
spk10: So hello, Edison. I'll answer our first question. So as we mentioned in the script, that if we compare the second quarter with the first quarter on the utility cost to the total revenue percentage, it's roughly for the second quarter is around 29%, and the first quarter is around 28%. So it's almost on the same cost level. And also, if you're referring to our just the EBITDA margin, for the first quarter and the second quarter, in the range of 52 or 53, but for the four-year guidance, this is slightly than the first half. That is the reason we have already taken this effect for the potential utility cost increase in certain areas in some of our campuses. And so I think this will solve your question, first question. And second one is on the tax issue. You know, we have a tax question. You know, we have the operation in different countries which apply to different tax rates and also for certain countries there is some tax policies which you can use if you have prior loss that can be offset for your future revenue for your future profit gain so this is like in China we have this tax policy So that is the reason why you can see previously the group net income has been gradually from negative to almost a balanced then to the positive. So this is a compound effect of different countries in conjunction with the tax policies of different countries. So thank you.
spk06: So what is the current tax rate like this year? I just want to know for the full year of 2022, what is the reasonable tax rate that we should be looking at?
spk10: So the tax rate is a compound rate, which will be also like take the other EBITDA factors like depreciation and also share-based compensation. So the tax rate will be fluctuated based on the real tax policies. So it's not like the... utility cost percentage to revenue in the fixed range?
spk03: One thing I want to add is actually instead of looking at a tax rate or the tax burdens or whatever, but you should look at we have achieved historical net margins. So we're probably have a leading profitability profile among all IDC companies that are listed in the overseas. So please focus on that point as well. Thank you.
spk06: Okay, thank you. Thank you.
spk11: We are going to proceed with the next question. We have the next questions coming from the line of Albert Hung from J.P. Morgan. Please ask a question. Your line is open.
spk08: Thank you for the opportunity to ask a question. I have two questions. The first is about our industry. A few days ago, The reason is that the demand for large-scale customers has been slowed down. The situation of the general manager is also not very good. In fact, this should affect the wishes of other customers who are doing supply chain distribution. I want to know how the situation is here. Have you seen any impact on this matter? My second question is, can you please share with us the current price changes in the M&A market, whether it is the price variation or something like that? My first question is about the customer diversification. GDS has revised some of the four-year guidance it has made two days ago due to the hyperscale server demand slowdown and macro headwinds. Theoretically, that should impact their intention for other customers to do supply chain diversification. How does chain data feed the impact? And my second question is, could you share some colors on the recent variation in MML market? You mentioned some ongoing deals last time. Is there any update on that? Besides, let's say if chain data becomes a target for others, what's the management or large shareholder initial take-down list?
spk03: Thank you. Thank you. And I will refer your first part of the question to our CEO, Mr. Wu Huapeng. And I will address your second question. Please go ahead, Huapeng.
spk08: I think from the perspective of performance and from the company's point of view, Qinhuai has always had a relatively cautious attitude towards providing our performance benefits to the market. As you mentioned, Xiaqiao, their benefit method may be based on the growth history of the industry to make a contribution to the industry. Qinhuai is based on the actual order, a little bit of addition to make a contribution to our future revenue trend. Therefore, we have been able to perform well and achieve high-quality development. For our customers, our key customers have been providing the company with a very healthy harvest. We will continue to serve our current key customers, and at the same time, expand the opportunity for healthy customer diversification. In terms of the industry, the platform economy has encountered some difficulties in the past two years, but we are also paying attention to the recent signals that are releasing policies to continue to support the platform economy's healthy development. We will continue to pay attention to market opportunities and promote our diversified strategy.
spk05: From the company's perspective, we have been communicating our forecast to the market in a very cautious manner, and that's why we have been able to live up to or out-beating the market expectation along the way. As to comparing to our peers, probably they adjust their expectation or forecast because The methodology they're making their forecast is basically relying on the industrial trend. But for us, we're actually making our forecast by adding up the actual commitment or the actual confirmed order from our client. We add them up and then making a concrete and cautious conclusion. So probably the difference comes from the different methodologies. From our perspective, we believe that the market can also share the view with our historical performance that our key client has been making healthy demand calls, and we believe that it will stay so in the near future. From the industry perspective, the platform economy was hit in the past two years. but we have witnessed some positive regulatory movements and news in the recent news as well. We will keep on watching for more market opportunities and promote our diversification strategy. Thank you.
spk03: Thank you, Hua Peng and Joy. Now the questions related to merger acquisitions, I think first of all, I want to lay out some context. As you probably know that the CHIN data is a business model of business growth is quite different from the rest of peers. Our business model on growth is primarily through organic growth on greenfield development projects. And we believe this gives us a huge advantage and will keep providing this advantage in the future on a sustainable basis in terms of efficiency, in terms of cost, and in terms of the power and other relevant IDC infrastructure integrations. This is why you see that our financial performance in terms of, you know, the operating result in terms of a project IRR or IORC, whatever metric you're talking about, is actually better than the industry average for sure. Having said that, we also keep this merchant acquisition as the, good alternative, but not core. And we also keep a very close eye on what happens in the marketplace. But so far, this quarter, second quarter compared to the previous quarter, we have not observed a significant pickup of emerging acquisition activities. Therefore, the price, based on our observation, has not changed too much compared to a quarter ago. The previously mentioned merchant acquisition cases, we are still working on them, and we have also made some further progresses. Hopefully, I will have more to tell you next time. Okay. On CD, on the issue of CD being the potential acquisition target, I don't, to be honest, I don't think the management here, anybody here in the position can be in a position to comment a lot. But we all think, we all think that given the company's strong fundamental and prospect, we believe our stock price is way undervalued and a lot of the market participants and players are holding the same view. And also we heard that there have been quite a few speculative interests in data, in corporation, in merchant acquisition, whatever, But I don't have knowledge at the moment about any material development out of these speculated interests. But we will do the proper material disclosure when they become material. Thank you.
spk02: We are going to proceed with the next question.
spk11: The next question comes online of from Morgan Stanley. Please ask a question.
spk01: Thank you for the opportunity to ask a question again. We have seen in the public news that the company in Datong's new large district will also participate in the construction of some new power plants. I would like to ask what kind of form this company is participating in. Is it a share of JD? Or is it a part of the project? Or what kind of form is it? Will the relevant capital expenses be significantly increased? Thank you. I will do the translation. We noticed that in the news report talking about the Datong campus, Qingdao will build some new energy solar farm or wind farm. Could management update us in terms of what is the format for doing this? Is this set up by JV or build the farm yourself? And what is the related capex for that? Thank you.
spk03: Thank you, Liu Yang. I'll refer to Mr. Wu Huapeng to answer questions on Datong again.
spk08: So overall, we will not overdo it in the development of new energy to do fixed investment. The main focus is on cooperation with partners. We provide a long-term use. Now we are actively communicating with the government and some local enterprises. Okay, thank you.
spk05: Translation for welcome to work so on the green power generation and that development focus That's actually in line with our consistent green power development strategy for our group for this specific that whole project we actually going to focus on collaboration with our partners on the equal ecological power development we will be the will be the consumption side, particularly in this project. We will not going to make excessive fixed asset investment into this project, but we will focus on bridging the government and utilize our local resources for the future collaboration.
spk02: We will now proceed with the next question. The next question comes from the line of Tina Hu from Goldman Sachs.
spk11: Please ask a question.
spk02: Thank you.
spk10: The PVE of the entire data center is about 1.24, so in theory, it should be more energy-saving. But on the other hand, will the price of this kind of equipment be a little more expensive? So have we ever done an analysis of this kind of full-time IRR or cash flow? Will we be more Let me translate for myself. So we saw that the X-cooling technology obviously is going to be very energy efficient and bringing down the PUE below 1.1. So just wondering, have you done any the full life cycle analysis of adopting this kind of ex-cooling technology. On the one hand, we think it's going to save the electricity expense, but on the other hand, it might be more expensive than the traditional or existing cooling equipment. So just wondering if you have any plans to adopt this technology on the large scale going forward. Thank you.
spk03: Thank you, Tina. Yeah, I can answer those questions. I think, first of all, I think this kind of technology, when we do the internal research and development, we actually always find the balance between the cost, the capex cost, and also saving on the potential operating costs. I can tell you that on this technology, the balance is very, very good. So there won't be a significant pickup of the cost, if not reduction. That's number one. Number two, I think it will save the power consumption in the future. But most importantly, it's also going to save the water. So in the region we operate, especially in the north part of China, I think the water consumption is also closely monitored by the government and relative agencies. So with this technology, we can save tons of water, which actually further provides our expandability and scale-up potentials in the future. And so one minor thing I want to correct you is that previously, I think we always communicated our corporate-wide or company-wide average PUE number has been standing at 1.21, not 1.24. 1.21 is our number. And it's actually, we think it's industry-leading positions. Thank you. And moving forward, with this technology applied in more places and more projects, We anticipate this number is going to further down.
spk02: Thank you very much.
spk11: As there are no further questions at this time, ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect your lines. Thank you, and have a good day.
spk03: Thank you, everyone. Thank you for your time.
Disclaimer