TLKM - 9M23 in-line, heading to another step forward

KBVS Update
Friday, 3 November 2023

TLKM: 9M23 in-line, heading to another step forward
(Maintain BUY; TP: IDR4,510)        

•    TLKM's 9M23 results were generally in-line with ours at 74.9-77.0%, thanks to better cost efficiencies stemming from initiation of FMC.  This also boosted EBITDA margin by 290bps to 54.8% in 3Q23, yet 3Q23 revenue was relatively flat +1.0% qoq.

•    TLKM’s 3Q23 revenue was mostly driven by network and other telco on tower lease. Indihome subs grew strongly +273K thanks to integration of B2C, despite lower ARPU at IDR257K or -1.2% qoq in 3Q23 amidst intensifying competition.

•    Meanwhile,Telkomsel's revenue ex-Indihome was also flattish in 3Q23 amidst a decline in ARPU 2.2% qoq and stable data yield. However, Telkomsel managed to add 5.03 mn of new subs in 3Q23.

•    TLKM is planning to set up a new entity on for consolidating infrastructure especially fiber that is estimated to complete by 4Q23 as well as data center consolidation as part of five bold moves strategy. On mobile, we anticipate improving competition to continue as we do not pick-up aggressive move from competitors as they are now focused on increasing their ARPUs

•    Reiterate our BUY call with an upgraded target price IDR4,510 (previously: IDR4,420) as we have rolled forward our DCF-based valuation to '24. Note that at our target price, it implies 5.8x EV/EBITDA, while it is currently trading at 4.3x forward EV/EBITDA or at below -1 SD 5 year-mean

Regards,
Devi Harjoto – KBVS Research Team