Mid-Year Review: Challenges Persist, Target Updated
Key Takeaways:
▪️TLKM booked a revenue of IDR75.3trillion in 1H24 (+2.5% YoY), translating into IDR37.9trillion in 2Q24 (+1.2% QoQ/+1.3% YoY). This performance fell slightly below our target, meeting only 47.9%/48.7% of MNCS/Consensus estimates.
▪️EBITDA was reported at IDR18.4trillion in 2Q24 (-5.0% QoQ/-4.9% YoY), with a margin of 48.7%, down from 51.9% in 1Q24. Additionally, net income contracted by -5.7% QoQ/-9.9% YoY to IDR5.7trillion in 2Q24 or -7.8% YoY to IDR11.8trillion in 1H24, followed by narrowed NPM to 15.1% in 2Q24 (vs 16.2% in 1Q24).
▪️Upside driver to the performance: the growth in Data, Internet & IT Service segment, with +5.0% QoQ in internet and data revenue/GB in 2Q24. We view this as an indication that the launch of Telkomsel Lite did not hurt the pricing yield as the market had previously concerned.
▪️Pressuring factors to the performance: 1) flat increase of mobile customers resulting in flattish mobile ARPU; 2) unfavourable performance from IndiHome; 3) the increase in unrealized loss from investment in GOTO to IDR854billion (vs IDR403 loss in 1Q24); 4) the notable one-off transaction for Early Retirement Program (ERP) amounted to IDR1.2trillion.
▪️Given the trimmed guidance from management and the earnings evidenced in 1H24, we have revised our projections accordingly, expecting changes of +1.3% YoY in revenue, -2.0% YoY in EBITDA, and -5.3% YoY in net income for FY24E.
▪️We maintain a BUY recommendation for TLKM, despite further lowering our TP to IDR3,500/share (+21.5% upside), implying 5.0x/4.9x of FY24E/FY25F EV/EBITDA.
