CATL affiliates plan to take over SDHG's VNET stake; Goldman Sachs is watching the potential for compute-and-power synergies

Overview

This report discusses VNET's introduction of a new strategic investor and the potential implications. VNET announced that PJ Millennium I and PJ Millennium II intend to buy up to 650 million Class A ordinary shares from Shandong Hi-Speed Holdings Group; the buyers are wholly owned subsidiaries of PJ Millennium Ltd Partnership, whose general partner is a non-controlled affiliate of CATL. The transaction is expected to close in 4Q26 after approval by SDHG shareholders, and upon completion the buyers will hold about 38.1% of VNET's outstanding shares.

Core views

Goldman Sachs' core view has three parts: first, if the transaction closes as announced, the pressure from SDHG's potential exit or reduction and the resulting shareholder change should be alleviated; second, because the buyers must vote as directed by the founder side during the specified period, Josh Sheng Chen's management control is expected to remain stable in the near term, supporting strategic continuity; third, against the backdrop of the national strategy of coordinating compute and power, CATL affiliates as strategic investors have potential synergy value, especially in helping VNET accelerate energy-storage deployment in data centers.

Analysis framework

The report uses an event-driven framework, combining equity transaction terms, voting-right arrangements, the company's business structure, wholesale IDC growth expectations, and EV/EBITDA valuation sensitivity to assess the investment implications for VNET. Goldman Sachs also cites the company's revenue mix, future revenue and EBITDA forecasts, target multiple, target-price history, and risk list to support its Buy rating and 12-month target price.

Methodology notes

• Valuation methods12-month forward EV/EBITDA

  The target price is based on 2027E adjusted EBITDA and a target EV/EBITDA multiple.

  Goldman Sachs uses 12x 2027E adjusted EBITDA as the target multiple to derive VNET's 12-month target price of US$15.5; the sensitivity table shows that as 2027E EV/EBITDA rises from 10x to 14x, the implied value per ADS increases from US$11.4 to US$19.7.

• Factor analysisGS Factor Profile

  A relative comparison of stocks based on growth, financial returns, valuation multiples, and composite metrics.

  Goldman Sachs Factor Profile uses analyst forecasts and standardized rankings to compare a stock's growth, return, and valuation attributes against the market and industry peers, providing a reference for the investment backdrop.

• M&A analysisM&A Rank

  A 1-to-3 score used to measure the probability of acquisition, with 3 indicating a low probability.

  VNET's M&A Rank is 3, which under Goldman Sachs' framework indicates a low probability of being acquired and typically does not materially affect the target price.

Asset mapping & comparison

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

• VNET Group (VNET.US)

  Research coverage name and Buy-rated stock

  Strengths

  A leading neutral data center operator in China, with IDC contributing about 75% of 2025 revenue; wholesale IDC is expected to grow rapidly, and stronger AI investment may accelerate revenue and EBITDA growth.

  Weaknesses

  Annual EPS remains negative, FCF yield is negative, net debt/EBITDA is relatively high, and declines in the legacy business may still weigh on performance.

  Comparison

  Goldman Sachs believes VNET is transitioning from a traditional retail IDC operator to a fast-growing wholesale IDC operator, and the rising contribution from wholesale IDC could drive a valuation re-rating.

  Risks

  Insufficient financing, order capture or execution below expectations, AI-related geopolitical risks, further deterioration in the legacy business, and changes in AI model training demand.

• CATL / CATL affiliates

  Potential strategic investor affiliates

  Strengths

  Has strengths in battery and energy-storage technology, which could support VNET in deploying energy-storage systems in data centers and enhance compute-power coordination.

  Weaknesses

  CATL itself is under Coverage Suspended status, and the buyers in this transaction are its non-controlled affiliates, so direct strategic control and synergy intensity remain to be observed.

  Comparison

  Compared with SDHG's state-backed shareholding, Goldman Sachs believes this transaction would shift VNET's shareholder image toward support from a leading private strategic participant.

  Risks

  There is uncertainty around transaction completion, governance arrangements, and the realization of technical synergies.

• Shandong Hi-Speed Holdings Group (0412.HK)

  Existing shareholder proposing to sell VNET shares

  Strengths

  Previously provided VNET with a state-backed shareholder profile.

  Weaknesses

  Its potential exit or reduction is seen by investors as a source of shareholder-change pressure for VNET.

  Comparison

  SDHG bought VNET shares in November 2023 at US$2.76 per ADS, and the proposed sale would change VNET's shareholder structure.

  Risks

  The transaction requires SDHG shareholder approval; if it is not completed, shareholder-change pressure may persist.

Key data

• Shares to be purchasedUp to 650mn Class A ordinary sharesThe buyers are PJ Millennium I and PJ Millennium II, and the seller is SDHG.
• Post-transaction ownershipAbout 38.1%This refers to the expected share of VNET's outstanding shares held by the buyers after the transaction closes.
• Transaction priceAbout US$1.45 per ordinary share, or about US$8.69 per ADSRoughly 4% below the May 12, 2026 closing price.
• Founder voting power41%Josh Sheng Chen holds about 32% beneficial ownership and 41% voting power; the buyers are expected to hold about 33% of voting power and vote as directed by the founder side during the specified period.
• 2025 revenue mixIDC about 75%, cloud computing and VAS about 25%Goldman Sachs says VNET is a leading neutral data center operator in China.
• Wholesale IDC growth expectation2024-27E revenue/EBITDA CAGR of 50%-54%Goldman Sachs believes VNET is entering a phase of accelerating revenue and EBITDA growth.
• 12-month target priceUS$15.5Based on 12x 2027E EV/EBITDA.
• Current priceUS$11.28VNET's price under the chart disclosure convention.
• RatingBuyGoldman Sachs maintains a Buy view.

Impact & implications

If the transaction closes, VNET's shareholder structure would shift from SDHG, a state-backed shareholder, to support from CATL-related private strategic forces, which could ease market concerns over shareholder changes and strengthen the company's strategic narrative around data center power supply, energy storage, and wholesale IDC expansion. However, the transaction still requires SDHG shareholder approval, and actual synergy realization will depend on VNET's financing capacity, order execution, the persistence of AI demand, and changes in the technology path.

Risks

• VNET cannot secure sufficient financing for growth targets.
• Order capture and execution are weaker than expected.
• AI-related geopolitical risks affect demand or valuation.
• The legacy business deteriorates further.
• New technological developments cause AI model training demand to change faster than expected or in unexpected ways.
• The transaction fails to obtain SDHG shareholder approval or does not close on schedule.
• Strategic synergy realization between CATL affiliates and VNET falls short of expectations.

What to watch

• Whether SDHG shareholders approve the share sale and whether the transaction can close in 4Q26.
• Whether the post-deal voting arrangement preserves management and strategic continuity.
• Progress in cooperation between VNET and CATL-related resources in data center energy storage, power supply, and compute-power coordination.
• Whether wholesale IDC orders, revenue, and EBITDA growth match Goldman Sachs' high-growth expectations for 2024-27E.
• VNET's financing capacity, net leverage, free cash flow improvement path, and pressure from legacy-business declines.
• AI investment intensity, AI training demand, and changes in related geopolitical policies.