TLKM - 1Q23 below estimates, earning call KTA

TLKM's 1Q23 net profit grew 5.0% yoy/54.4% qoq to IDR6.42 tn, supported mainly by adjustment in fair value of investment in TO. However, excluding non-core items, net profit was down 19.2% qoq in 1Q23 to IDR6.10 tn. Despite this, TLKM demonstrated an improvement in efficiency where cash cost lowered by 9.5% qoq. As a result, EBITDA margin increased to 52.6% in 1Q23. Unfortunately, lower cost was actually in-line with soft revenue growth of 2.5% yoy/-6.1% qoq to IDR36.1 tn dragged by TSEL's digital revenue -6.3% qoq and legacy service -4.5% qoq along with flattish Indihome revenue growth +0.9% qoq. Amid soft top-line and intensifying competition in fixed broadband, TLKM management is still confident with mid single digit target in 2023, pinned by integration of Indihome-Telkomsel in 2Q23 that will be able to unlock growth potential and optimize cost efficiency. (Source : Company, KBVS Research) Comment : While we are still waiting for management's call, TLKM 1Q23 performance is slightly below ours/consensus in overall with TSEL's recorded a decrease in ARPU qoq to IDR45K/sub and data yield -4.5% qoq despite already lower payload 1.9% qoq. Combining with continuous subs decline -3.7% qoq/-13.7% yoy, this could indicate customer shifting, highlighting heigthened competition in the market, beside management's on less productive subscribers cleanse. Although, we are still reviewing our numbers, we still maintain our positive view on TLKM especially on oning integration of Indihome under Telkomsel (FMC) which will be focused on B2C business. This should serve as solid growth catalyst, thus strong upside for TLKM ing forward.