EXCL - Underpinned by momentum of price repair

EXCL's 2Q23 performance beats estimates, arriving at 51.1-55.5% of ours/consensus. The company has taken an advantage from market repair, resulting in strong operational performance, ARPU +8.3% qoq in 2Q23 and customer addition. We lift our revenue and EBITDA forecast by 1.9% and 3.0%, respectively. The company’s is traded in attractive valuation, currently at 2.4x FY ’23 EV/EBITDA. Maintain BUY 1H23 results outperform EXCL’s 2Q23 EBITDA surged strongly 15.0% qoq to IDR4.01 tn, bringing 1H23 EBITDA to IDR7.50 tn, ahead of our FY ’23 estimate at 51.0%. This brought EBITDA margin to expand by 260bps qoq/190bps yoy in 2Q23 to 48.8%. Strong EBITDA performance was mainly supported by robust revenue growth +8.9% qoq in 2Q23 in line with continued momentum of better competition landscape. Additionally, EXCL also demonstrated improved cost discipline with cash cost to revenue ratio lowered to 50.5% in 2Q23. Leverage- wise, we noted EXCL’s gross debt to EBITDA dropped by 20.7bps YTD to 0.7x in 1H23. Reaping benefits from better competition Strong financial performance in 1H23 was underpinned by price rationalization throughout 1H23 thanks to strong consumer recovery that yielded higher ARPU +8.3% qoq to IDR44.7K/ subscriber. Amid higher ARPU, EXCL managed to add c. 100K new mobile users in 2Q23, while data/consumption per users kept growing, which have indicated a limited impact from ongoing price repair. This was also propped up by competitors’ eagerness to follow through as well as the company’s strong value preposition through personalized apps and enhanced customer experience. On FMC product, XL Satu penetration has reached 56% in 1H23. Revise up earnings forecast EXCL maintains its FY'23 guidance of high single digit growth with EBITDA margin at 49% (vs. KBVS’ 23F of 48.1%) on expectation of 3G spectrum shutdown resulting in further cost efficiency. Given stronger than expected results, we make readjustment for our FY '23 figures, as we expect EXCL to continue capitalizing price repair momentum, while competitors are all seen eager for further price adjustment in 2H23. We revise up our EXCL’s FY2023 revenue and EBITDA by 1.9% and 2.3% respectively. In addition, EXCL is planning to enhance mobile network coverage in greenfield areas, fixed broadband expansion by eyeing to add 400K of home connects at year-end and diversify its managed service offerings following Hipernet acquisition. Reiterate BUY on structural transformation Maintain our BUY call with a target price of IDR2,920, implying 3.2x 2023F EV/EBITDA or above -1SD historical mean. Risks to our call included 1) competition in mobile; 2) lowerthan-expected EBITDA margin on the back of costs pressure.