TLKM
Contact our analyst Eka
14th August 2023
BUY, 39% upside
Price Rp 3810
Target price Rp5,300
BUY, 39% upside
Price Rp 3810
Target price Rp5,300
Single digit revenue growth
- TLKM has maintained stable revenue of IDR 73.47 trillion, showing a 2% YoY growth in the first half of 2023.
- The growth is primarily driven by the Data, Internet & IT service and Indihome segments. In the second quarter of 2023, TLKM recorded revenue of IDR 37.7 trillion, representing a 2% YoY growth and a 4% QoQ growth. The Data, Internet & IT service revenue increased by 5% YoY to IDR 22.5 trillion in 2Q2023, mainly due to higher cellular data internet revenue. Mobile data traffic also saw a significant increase of 9.4% YoY.
- IndiHome, on the other hand, experienced a 3% YoY growth to IDR 7.19 trillion in 2Q2023, driven by an increase in new subscribers by 7.2% to 9.5 million. However, the ARPU slightly declined to IDR 260 thousand in 2Q2023, possibly due to customers opting for the dual package subscription.
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IndiHome Spin off
2Q2023 Results: Margin decline
Valuation: Maintain BUY with TP 5,300
- Telkom and Telkomsel have signed a spin-off agreement to integrate IndiHome into Telkomsel, with the official integration starting in July 2023. This integration is expected to strengthen Telkomsel's position in the telecommunication and digital industry while also potentially increasing revenue through commercial synergies, operational efficiency, and capital expenditure optimization. In the first half of 2023, Telkomsel recorded positive revenue growth of 1% YoY and 4.7% QoQ, amounting to IDR 44 trillion. However, the net income decreased by -5.8% to IDR 10.28 trillion.
- Despite the decrease in net income, Telkomsel has maintained a stable customer base of 153.3 million users.
2Q2023 Results: Margin decline
- In the second quarter of 2023, TLKM experienced a decline in its bottom line profit, with a decrease of -1.4% QoQ and -12% YoY, resulting in a total of IDR 6.3 trillion. The decline can be attributed to higher operating and maintenance expenses, which increased by 12% due to an increase in spectrum usage fees. As a result, TLKM's NPM decreased from 19.6% in 2Q2022 to 16.9% in 2Q2023.
- Additionally, TLKM incurred an unrealised loss of IDR 18 billion from the change in the fair value of its investment in GOTO in 2Q2023, compared to an unrealised gain of IDR 430 million in 1Q2023. The operating profit also decreased by -6% YoY or 1.4% QoQ to IDR 11.6 trillion, resulting in a lower OPM of 31%.
Valuation: Maintain BUY with TP 5,300
- We expect lower expenses in the second half of 2023 due to anticipated improvements in operating and capital expenditure efficiency. This is expected to have a positive impact on the profit margin.
- Our target price for TLKM is IDR 5,300, which represents 39% upside. This target is based on a 21X PE valuation within one year. Our recommendation to BUY is maintained.
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