Telkom Indonesia (TLKM IJ)
In line FY24 Earnings; Navigating FMC Transition and Weak Macro with Capex Optimization
- 4Q24 earnings were supported by Enterprise/WIB revenue, despite a weaker EBITDA margin, while mobile posted a promising ARPU uplift.
- Lower-than-expected capex helped manage D&A, keeping FY24 core net profit inline amid TSEL’s FMC transition and a weak macro backdrop.
- We maintain BUY rating with a higher TP of Rp3,900, assuming a lower capex and +5-6% FY25-26F net profit upgrade.
Managing FY24 earnings amid transition to FMC and a weak macro
Telkom FY24 core net profit was Rp23.6tr (-4.1% yoy), well in-line with cons, despite flattish revenue of Rp149.97tr (+0.5% yoy, in-line) and a lower core EBITDA of Rp76.3tr (-1.7% yoy), well in-line with ours/cons. FY24 earnings outperformed compared to our forecast primarily due to significantly lower capex, which helped contain D&A charges and protect earnings.
Resilient earnings with revenue growth and significantly lower Capex
Telkom delivered 4Q24 core net profit of Rp5.5tr (-3.0% qoq, -0.7% yoy, supported by revenue growth to Rp37.7tr (+2.2% qoq, -0.6% yoy), with contributions from Mobile, Enterprise, and WIB segments. However, this was offset by a decline in EBITDA margin (-210bps qoq to 48.7%) as O&M and S&M OPEX significantly rose. Capex intensity was significantly lower in 4Q24 and FY24 at 18.4%/16.3% capex-sales ratio (historically 21%+), due to delivery delays in new data center capacity, helping manage D&A charges and supporting earnings.
A decent 4Q24 with mobile ARPU uplift; Indihome still a work in progress
TSEL’s 4Q24 service revenue was Rp21.4tr, a slight -0.1% qoq decline despite a ~+2.1% qoq increase in ARPU and +0.6% qoq subscriber growth (+973k subs), suggesting a weak Oct–Nov24 period, while we think Dec24 monetization improved, pulling up quarterly ARPU. IndiHome added 200k subs in 4Q24, with ARPU down by -0.8% qoq, resulting in flattish revenue.
Maintain BUY rating with higher TP amid better cashflow outlook
Capex rollout delays may extend to the mobile and WIB segments, driven by soft macro, funding from a new investor in DCs, and group capex optimizations. We thus lower our capex-to-sales assumption to 19% (from 23% prev.), pending updates from the earnings call. Amid these catalysts, we also trim our revenue CAGR to +3%, being conservative across our DCF. Nonetheless, the lower capex leads to (a) lower D&A which raises our FY25–27 NP by +5.6%/+5.2%/+6.4%, and (b) better FCF prospects, supporting a higher valuation and a new TP of Rp3,900 (from Rp3,680), maintaining our BUY rating. Weaker macro and topline competitiveness are key risks.
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