• Maintain BUY, with new IDR5,030 TP from IDR5,100, 24% upside and c.4% yield. FY22’s topline fell slightly below our, but was in line with consensus estimates. We expect 1Q23 data ARPU to grow relatively flat as our ground checks suggest Telkomsel has not increase most of its data prices hence data yield is relatively flat. However, with the data demand hike during Ramadan in 2Q23, we should see better data yield, translating to higher data ARPU and topline.

• Cellular data revenue remained resilient despite the drop in subscribers (subs). Despite the drop of subs (-1.9% QoQ, -10.9% YoY), Telkom Indonesia deliver resilient cellular data revenue, which grew 3.1% QoQ and 9.2% YoY in 4Q22, driven mainly by growing data payload (+3.6% QoQ, 13.4% YoY) and data ARPU (+5.5% QoQ, 9.9% YoY). On an annual basis, legacy revenue declined 16.6% YoY in FY22 but was supported by cellular data revenue which grew 7% YoY. Despite that, the total mobile segment still grew 1.5% YoY. We believe Telkomsel’s strategy has successfully improved productivity, as well as the quality of its customers, evidenced by its cellular data revenue growth.

• IndiHome – steady growth. As the second largest revenue contributor to TLKM, IndiHome (19% of total TLKM revenue) showed solid growth in 4Q22 by +1% QoQ and +6.6% YoY, supported by growing subscribers that reached 9.2m (+1.9% QoQ, 7.1% YoY) and maintained ARPU. As of FY22, IndiHome revenue was IDR28tn (+6.4% YoY), with EBITDA of c.50% and coverage has reached 501 cities.

• 4Q22 core net profit of IDR27tn (+14.2 QoQ, +173.4% YoY). 4Q22 net profit improved by 27.5% YoY due to significantly lower minority interest but was down by 29.1% YoY due to an unrealised loss, mainly from its investment in Goto Gojek Tokopedia (GOTO IJ, NR). However, 4Q22 net core profit grew by +14.2% QoQ and +173.4% YoY, supported by operating costs efficiency, bringing the FY22 number to IDR27trn (+27.4% YoY) – slightly above our and Street estimates at 103.6% and 110.6%.

• Expecting mid-single digit growth in 2023F. We tweak our estimates for 2023F and 2024F on the back of a lower number of subscribers and expect data yield to grow by a mid-single digit. Going forward, TLKM revenue is estimated to grow by 4.3% YoY (vs management’s mid- to high-single digit), supported by its mobile segment’s low single digit growth of 2.2% YoY due to declining legacy and its growing IndiHome segment. Capex-wise, the company is expected to spend 20-25% of revenue, with 35% to mobile, 35% to broadband and the remainder to data centre and cable.

• We apply a 3% ESG premium to our TP, based on our in-house methodology, to derive our new IDR5,030 TP. Maintain BUY.

Source: RHB Research - 29 Mar 2023