TLKM
Contact our analyst Eka
14th August 2024
BUY, 45% upside
Price Rp 2,850
Target price Rp4,150
BUY, 45% upside
Price Rp 2,850
Target price Rp4,150
Stable Revenue
- TLKM reported flat revenue of IDR 37.8 trillion in Q2 2024, reflecting a +2.5% year-over-year (YoY) growth to IDR 75.3 trillion for 1H 2024.
- The data, internet, and IT services segment remains TLKM’s largest revenue contributor, accounting for 64% of total revenue, or IDR 24.2 trillion, which represents a +7% YoY increase. This growth was driven by a robust increase in mobile data services and a 2.2% quarter-over-quarter (QoQ) rise in data traffic. However, the Average Revenue Per User (ARPU) remained steady at IDR 45 thousand, influenced by the recent launch of Telkomsel Lite.
- IndiHome’s revenue surged by +18.2% QoQ to IDR 8.11 trillion in Q2 2024, reflecting growth following the reclassification of IndiHome enterprise (B2B) revenue into the Data, Internet & IT services category starting in Q1 2024. Despite this, ARPU slightly decreased by -1% QoQ to IDR 240 thousand, while subscriber numbers grew by 2.5% QoQ, reaching 9.14 million.
- Network revenues rose by +47% YoY to IDR 852 billion in Q2 2024, supported by TLKM’s expanding network business and increased tower and digital services revenue. We believe TLKM’s efforts to defend its market share and competitiveness will result in further subscriber growth, coupled with a gradual ARPU increase ahead. Due to current market conditions, TLKM is targeting low-single-digit revenue growth for FY2024.
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Q2 2024 Results: Decline QoQ and YoY due to one off cost
Valuation: Maintain BUY with TP 4,150
- TLKM’s bottom line declined both QoQ and YoY, driven by higher personnel and general administration expenses. The company’s profit for Q2 2024 was IDR 5.71 trillion, reflecting a -5.7% QoQ and -9.9% YoY decline. This was primarily due to a +30.5% YoY increase in personnel expenses to IDR 5.36 trillion, as TLKM implemented an Early Retirement Program (ERP), incurring a one-off cost of IDR 1.24 trillion. General and administrative expenses also rose by +23.2% to IDR 1.83 trillion, leading to a decrease in TLKM's Net Profit Margin (NPM) to 15.1% in Q2 2024, down from 16.2% in Q1 2024.
- However, excluding ERP costs, mark-to-market GOTO, and one-off gains from asset unlocking, core net income grew by +4.2% YoY to IDR 13 trillion in 1H 2024, with a core net income margin of 17.4%. Operating profit decreased by -8.3% YoY or -3.5% QoQ to IDR 10.6 trillion, resulting in a lower Operating Profit Margin (OPM) of 28.1% in Q2 2024.
- Additionally, in 1H 2024, TLKM incurred an unrealized loss of IDR 857 billion from the change in the fair value of its investment in GOTO, valued at IDR 50 per share, compared to an unrealized gain of IDR 412 million in 1H 2023.
Valuation: Maintain BUY with TP 4,150
- We maintain our target price for TLKM at IDR 4,150, representing a 45% upside potential. This target is based on a one-year forward P/E ratio of 16x. Our recommendation to BUY is maintained based on these projections.
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