In Line Numbers

In line revenue. TLKM posted revenue of IDR 37.8tn in 3Q23 (+1.0% QoQ; +2.4% YoY), bringing its cumulative 9M23 revenue to IDR 111.2tn (+2.2% YoY) in line with ours and cons (SSI: 72.7%; Cons: 73.1%). The company’s digital revenue was quite flattish, coming in at IDR 19.6tn (+0.6% QoQ; +6.3% YoY); even though there’s some pressure from seasonality, resilient data payload (4,526 pb; +0,3% QoQ; +9,1% YoY) and positive mobile subs growth (3Q23: 158.3mn; +3.3% QoQ; -1.0% YoY) with blended ARPU of IDR 48.6th (-2,2% QoQ; +8.0% YoY) helped prevent negative growth in digital revenue. Going forward, we expect the company’s cellular business to maintain its positive trajectory, backed by subscriber growth normalization and ample growth room for ARPU in 4Q (we noticed a positive correlation between an election and cellular data payload).  Regarding its FBB business, Indihome booked revenue of IDR 7.4tn (+2.8% QoQ; +4.8% YoY) in 3Q23, backed by positive subscriber growth (9.8mn in 3Q23,+1.9% QoQ; +8.4% YoY). However, its ARPU fell to IDR 257 thousand (-1.2% QoQ; -4.5% YoY). We expect the fierce competition in the fixed broadband sector will continue for a while, considering the low penetration rate of fixed broadband services in Indonesia.

Post-merger margin expansion. TLKM posted an EBITDA of IDR 20.7tn in 3Q23 (+6.6% QoQ; +3.3% YoY), bringing its cumulative 9M23 EBITDA to IDR 59.1tn (-0.7% YoY) in line with ours and cons (SSI: 73.7%; Cons: 73.4%). Its EBITDA margin expanded to 54.8% in 3Q23 (2Q23: 51.9%; 3Q22: 54.2%). To note, the company’s G&A expense came down to ~3.1% of revenue in 3Q23 (2Q23: 4.0%; 3Q22: 4.4%) thanks to the decline in consultant fee and collection cost, and its marketing cost fell to ~2.5% of revenue (3Q22: 2.9%), mainly due to the post-merger (Indihome-TSEL) synergies.  On its bottom line, the company posted a net profit of IDR 6.7tn in 3Q23 (+6.5% QoQ; +106.1% YoY), bringing its cumulative 9M23 net profit to IDR 19.5tn (+17.6% YoY) in line with ours and cons (SSI: 73.2%; Cons: 75.2%). Its core profit came in at IDR 7.2tn in 3Q23 (+17.0% QoQ; +24.1% YoY) with a cumulative core profit of IDR 19.5tn, in line with our estimate (SSI: 75.7%).

New guidance for TSEL. TLKM made some changes in its guidance for TSEL; TSEL’s revenue growth is now projected to reach the mid-teens (previous: mid-single-digit), with mid-50’s EBITDA margin and Capex of ~15-16% of revenue (previous: ~14-15%), due to its FMC initiative. Going forward, the company expects the ARPU of its mobile business to remain relatively stable as the rationalization of the mobile industry continues. TLKM also provided some updates on Infraco; Infraco is expected to start commercial operations early next year, which will help boost the optimization of TLKM’s fiber network. Regarding the spectrum auction, the company expects the auction to be held next year.

BUY on TLKM. We maintain our positive view on TLKM, as we believe that its dominance will help support its earnings growth and profitability in the long term. However, since GOTO’s share price has dropped considerably –31% YTD, we decided to make some adjustments as TLKM’s investment gain on GOTO might turn to investment loss of IDR 711bn (based on our TP for GOTO of IDR 69/share; Prev: TP: IDR 130/share). We revised down our 2023F net profit projection by -5.5%. We maintain our BUY rating for TLKM with a TP of 4,500, implying a 2024F EV to EBITDA of 7.1x. Risk: tighter competition.