Why 21Vianet Group Inc – ADR (NASDAQ: VNET) Stock Is Falling

21Vianet Group Inc – ADR (NASDAQ: VNET) stock fell 7.27% on 19^th August, 2020 (Source: Google finance) post second quarter of FY 20 update. The company delivered the adjusted cash gross margin of 40.9% compared to 45.5% in the same period of 2019. The decline in margin on a yearly basis was on back of the delivery of additional IDC capacity. Overall, VNET has reported the net loss attributable to ordinary shareholders in the second quarter of RMB2.12 billion, which reflects an increase from RMB102.1 million in the same period of 2019.

The firm has reported 28.8% rise in the revenue to RMB1.14 billion from RMB888 million in the same period of 2019. The growth came mainly due to the industry health growth trajectory and the ongoing capacity expansion which enabled the company to address the uptick in the demand for hyperscale IDC solutions during the quarter. Retail IDC MRR per cabinet in the second quarter rose to RMB8,953 from RMB8,663 in the same period of 2019. The company had added 4,404 new cabinets during the second quarter, including the recent acquired IDC in Shanghai, wherein more than 95% of the cabinets are currently being utilized by a public cloud customer. The income from IDC will start contributing to the revenue and EBITDA from the third quarter of 2020. At the end of June, 2020, the company had operated and managed 44,050 cabinets despite the capacity expansion. Compound utilization rate in the second quarter rose to 61.4% from 60.4% in the first quarter of 2020. Further, the utilization rate for those mature IDCs delivered prior to 2019 improved to 73.6% in the second quarter compared to 72.3% in the first quarter of 2020.

Moreover, the company posted adjusted cash gross profit in the second quarter, excluding depreciation, amortization, and share-based compensation expenses, of RMB467.6 million compared to RMB403.8 million in the same period of 2019. The company has reported 17.5% increase in the Adjusted EBITDA in the second quarter to RMB306.4 million from RMB260.7 million in the same period of 2019. Adjusted EBITDA margin contracted to 26.8% from 29.4% in the same period of 2019 driven by the delivery of additional capacity. The company generated net cash from operating activity of RMB161.8 million in the second quarter. At the end of June, 2020, the company reported a cash position of RMB4.98 billion. Earlier this month, the company had paid the remaining US$131 million of the 2020 bond.