TLKM
Contact our analyst Eka
18th November 2024
BUY, 38% upside
Price Rp 2,580
Target price Rp3,560
BUY, 38% upside
Price Rp 2,580
Target price Rp3,560
Soft top-line results
- Telkom Indonesia (TLKM) reported soft revenue figures of IDR 36.9 trillion in Q3 2024, reflecting a -2.2% year-over-year (YoY) decline. For the first nine months of 2024 (9M 2024), revenue marginally increased by 0.9% YoY to IDR 112.2 trillion. The ongoing natural decline in legacy business segments was offset by robust growth in data payloads.
- The Data, Internet, and IT Services segment achieved a positive growth of +3.3% YoY to IDR 22.45 trillion. This was driven by strong mobile data service growth and a 4.4% quarter-over-quarter (QoQ) rise in data traffic. However, Average Revenue Per User (ARPU) decreased to IDR 43,000 in Q3 2024, down from IDR 45,000, impacted by seasonal factors, intensified competition, and price wars in the telecom sector. TLKM strategically adjusted pricing to maintain market share.
- IndiHome revenue fell by -37.1% YoY and -42.6% QoQ to IDR 4.65 trillion in Q3 2024, reflecting the reclassification of its enterprise (B2B) revenue into the Data, Internet, and IT Services segment starting in Q1 2024. Despite this, ARPU for IndiHome decreased slightly by -2.3% QoQ to IDR 235,000, while subscriber numbers grew by +2.5% QoQ, reaching 9.37 million.
- Revenue from Network and Other Telco Services declined by -1.0% YoY and -9.7% QoQ to IDR 3.12 trillion in Q3 2024. However, this was partially supported by TLKM’s expanding network business and growth in tower and digital services revenue..
- Despite challenging conditions such as subdued purchasing power and a price war in the telecom sector, TLKM expects to maintain low single-digit revenue growth for 2024.
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Q3 2024 Results: Quarterly Improvement
Valuation: Maintain BUY with lower TP of IDR 3,560
- TLKM reported a net profit of IDR 5.9 trillion for Q3 2024, an improvement of +3.6% QoQ but a decline of -12.3% YoY. This decline was largely due to the early retirement program (ERP) undertaken in Q2 2024. In Q3 2024, general and administrative expenses rose by +31.7% YoY to IDR 1.56 trillion, while operation, maintenance, and telecommunication expenses increased by +8.4% to IDR 10.5 trillion. This followed a low base effect from Q3 2023, which benefited from a better recovery rate in collections.
- As a result, TLKM’s Net Profit Margin (NPM) for Q3 2024 stood at 16%, down from 17.9% in Q3 2023 but improved from 15.1% in Q2 2024.
- For 9M 2024, TLKM’s net profit declined by -9.4% YoY to IDR 17.67 trillion, mainly due to ERP costs in Q2 2024. Excluding ERP costs, mark-to-market adjustments for GOTO, and one-off gains from asset unlocking, core net income decreased by -5.7% YoY to IDR 18.5 trillion, with a core net income margin of 16.5%.
Valuation: Maintain BUY with lower TP of IDR 3,560
- We maintain a BUY recommendation for TLKM with a target price of IDR 3,560, implying a 38% upside potential. This target is based on a one-year forward P/E ratio of 14x. Despite short-term challenges, TLKM’s strategic adjustments and growth prospects in data-driven segments underpin our positive outlook.
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