HSBC initiates coverage on Range Technology (300442.SZ): Buy, target price RMB111.00

Overview

This is an initiation coverage company research report on Range Technology (300442.SZ). HSBC believes the company is upgrading from a traditional IDC provider to an AIDC operator and, with large-scale computing clusters, liquid-cooling technology, low-cost electricity, and scarce energy quotas, is well positioned to become a key beneficiary of China's AI infrastructure expansion.

Core views

The core investment thesis includes three points: first, demand for AI training and inference is driving rapid expansion in China's computing power demand, while capex by leading domestic internet and cloud vendors is accelerating; second, the company has 750MW of in-service capacity, a 6GW long-term plan, and 3.2GW of energy quotas, providing strong visibility on capacity expansion; third, the rising share of AIDC and GPUaaS will drive revenue growth and margin improvement, with revenue and EBITDA CAGR for 2025-2028 expected at 36% and 43%, respectively.

Analysis framework

The report analyzes industry computing power demand, capex by leading customers, the company's capacity plan, energy quotas, customer contracts, technological barriers, and segment revenue forecasts, and uses the EV/EBITDA multiple method to derive the target price. The valuation multiple references the company's historical average of 20x EV/EBITDA and higher expected future EBITDA growth, ultimately adopting 28x 2027E EV/EBITDA.

Methodology notes

• Valuation methodsEV/EBITDA relative valuation

  Using 2027E EBITDA as the valuation base, with reference to the company's historical EV/EBITDA and future EBITDA growth rate.

  The company's historical average EV/EBITDA is about 20x, and EBITDA CAGR for 2021-2025 was 31%; HSBC expects EBITDA CAGR for 2025-2028 to be 43%, and therefore adopts 28x EV/EBITDA, deriving a target price of RMB111.00 based on about RMB7.1bn of 2027E EBITDA.

• Fundamental forecastCapacity-driven revenue model

  Revenue growth is derived from growth in in-service and utilized IDC, AIDC, and GPUaaS capacity.

  The report expects the company's in-service capacity to reach about 1,609MW in 2028, with a higher share of AIDC revenue, driving overall revenue CAGR of 36% for 2025-2028 and AIDC revenue CAGR of 63%.

• Industry demandAI computing power demand and cloud vendor capex

  AI training and inference demand, SuperPOD cluster architecture, and capex by leading cloud vendors jointly determine AIDC demand.

  HSBC expects China's AI computing power demand to reach about 5GW by 2028, while combined capex of ByteDance, Alibaba, and Tencent is expected to grow 116% YoY in 2026, supporting orders and utilization for AIDC operators.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Range Technology (300442.SZ)

  Core covered stock

  Strengths

  750MW of in-service capacity, 6GW long-term plan, 3.2GW of energy quotas, liquid-cooling and large-cluster delivery capabilities, low-cost electricity resources, and long-term contracts with leading cloud vendors.

  Weaknesses

  Revenue is highly dependent on a small number of large cloud vendors, and the delivery schedule of large AIDC projects may affect short-term earnings realization.

  Comparison

  The company's average gross margin of 49% in 2018-2025 was higher than the peer average of 34%; its energy quotas and布局 around tier-one cities also make it scarce among third-party AIDC operators.

  Risks

  Intensifying competition, customer concentration, order cancellation or delays, and changes in energy quota policies.

• China's AIDC and GPUaaS industry chain

  Upstream demand driver

  Strengths

  Rapid growth in AI training and inference demand, accelerating capex by domestic cloud vendors, and SuperPOD clusters enhancing the value of specialized operators.

  Weaknesses

  Industry expansion requires substantial capital, power quotas, networking and liquid-cooling engineering capabilities, with long project cycles and complex resource approvals.

  Comparison

  The report believes capex intensity of Chinese cloud vendors remains below that of their U.S. peers, leaving long-term growth potential.

  Risks

  Rapid supply increases may create pricing pressure, while fluctuations in GPU rental prices and utilization may affect profitability.

Key data

• Rating and target priceBuy; RMB111.00Current share price CNY85.18, implying upside of +30.3%.
• In-service capacity by end-2025750MWLong-term plan of about 6GW.
• Energy quotas3.2GWOf this, 2.7GW is located around tier-one cities. Approval for energy quotas is complex and time-consuming, making it an important advantage in securing new orders.
• Forecast in-service capacity in 2028About 1,609MWIncluding about 637MW of traditional IDC and about 973MW of AIDC.
• Revenue CAGR for 2025-202836%Revenue is expected to reach RMB14.2bn in 2028.
• EBITDA CAGR for 2025-202843%EBITDA margin is expected to rise from 61% in 2025 to 71% in 2028.
• 2028 segment revenue forecastIDC RMB3.3bn; AIDC RMB10.9bnAIDC revenue is expected to deliver a 63% CAGR for 2025-2028.
• Customer concentrationByteDance contributes 49% of 2025 revenue; top five customers contribute more than 90%The company is also strengthening cooperation with clients including Alibaba, Tencent, JD, Kuaishou, and Meituan.
• Historical gross marginAverage 49% in 2018-2025Higher than the peer average of about 34%, mainly benefiting from advantages in large clusters, liquid cooling, and low electricity prices.
• Green power tradingAbout 2.4bn kWh in 2025About 200% YoY growth from about 800m kWh in 2024.

Impact & implications

If the report's assumptions materialize, Range Technology's investment value will mainly come from expanding demand for AI computing infrastructure, a rising share of AIDC revenue, improved EBITDA margin, and valuation re-rating. For the industry, the report emphasizes that the competitive focus of AIDC operators is shifting from traditional data center resources to energy quotas, liquid cooling, large-scale cluster networking, delivery and O&M, and access to low-cost capital.

Risks

• Competition stronger than expected may lead to pricing pressure, lower margins, and greater difficulty in securing long-term contracts.
• Customer concentration is relatively high; if major cloud service customers reduce data center usage or renegotiate contracts, revenue visibility will be affected.
• Order cancellations or project delivery delays may result in underutilized infrastructure, delayed revenue recognition, and higher operating costs.
• If data center energy quota policies become more stringent, the company's long-term IT capacity expansion and growth plans may be constrained.

What to watch

• Whether capex by leading cloud vendors such as ByteDance, Alibaba, and Tencent continues to be revised upward.
• Whether large AIDC projects such as Langfang B1 can enter serviceable status as planned in 2H26.
• Changes in GPU rental prices, GPUaaS utilization, and demand for high-performance AI computing power.
• Whether a higher share of AIDC revenue will drive EBITDA margin toward the forecast 71% in 2028.
• Whether energy quota approvals, green power usage, and PUE performance maintain the competitive advantage.
• Whether the customer mix will further diversify from ByteDance toward more leading internet and cloud vendors.
• Whether overseas node布局 in places such as Hong Kong and Indonesia can bring new growth sources.