ISAT – 1Q23 earnings beat estimates

ISAT's 1Q23 net profit grew around six-folds yoy to IDR929 bn, yet it arrived at 31.8%/28.9% of ours/consensus. However, lower qoq net profit in 1Q23 was caused by higher finance costs +13.1% qoq, as well as and forex loss of IDR100.6 bn. Furthermore, 1Q23 EBITDA jumped 21.7% yoy/-1% qoq to IDR5.33 tn. Meanwhile, ISAT's 1Q23 revenue slightly went down 2.3% qoq to IDR11.95 tn or 24.1%/23.7% of ours/consensus, dragged by MIDI and data revenue growth data traffic qoq and data yield by -1.5% qoq. On top of that, flattish revenue in 1Q23 was also in accordance with high base seasonality seen in 4Q22 (Source : Company) Comment : Higher finance costs in 1Q23 was due to leaseback tower transaction impact which we have anticipated. It is worth noting that network integration and 3G shutdown has been fruitful for ISAT, reflected by lower cost of service on frequency fee and rent. Management maintains guidance of 5-6% growth or in-line with market and EBITDA margin at c. mid 40's, emphasizing on improved costs efficiency following network integration. However, we note that plunging ARPU, data yield and subs could be sign that the competition remains stiff especially in 1Q23. However, higher average monthly data consumption/user may have signified better network capability following network integration and spectrum refarming. In overall, we still maintain positive view on ISAT especially on improved network capability through MOCN, allowing it to penetrate faster into other areas. We maintain our BUY call with a target price of IDR8,550.