TLKM – Soft 2Q23 earnings, misses estimate

TLKM's 2Q23/1H23 revenue came in below ours/consensus at 48.8%/47.6%, increasing +3.6% qoq/2.1% to IDR37.4 tn/IDR73.5 tn. The revenue growth was mostly supported by data, internet and IT service, thanks to improvement in cellular competition as Telkomsel saw ARPU ing up +13.1% yoy/5.6% qoq as well as data yield +2.2% qoq or outperforming peers. However, EBITDA margin contracted 260 bps yoy to 52.2% in 1H23 on the back of higher operations and maintenance +7.4% yoy/9.0% qoq amid continued efforts for network optimization. As a result, TLKM's 1H23 EBITDA achieved only 47.6%/46.1% of ours/consensus. TLKM recorded a tepid core profit growth of +2.2% qoq, yet declined 2.4% yoy in 1H23, below ours/consensus by 3.6%/5.4%. Comment : TLKM's 1H23 performance is generally below ours/consensus, although it is worth noting that is mostly weighed by operations and maintenance pertaining to spectrum as it is scaling up its capacity. Meanwhile, we noted tighter competition in fixed broadband that might have caused flattish Indihome +0.1% qoq and ARPU amid continued subs growth. We are still waiting for management's remarks during earnings call on Tuesday, 1 Aug. For now, we still maintain our BUY call, yet we are considering to adjust TLKM FY '23E figures