EXCL - Revenue grows 11.9%, announces transformation

EXCL's 1Q23 revenue was flat at IDR7.5 tn, yet increased 11.9% yoy or relatively in-line with estimates. Nevertheless, 1Q23 EBITDA dropped 7.1% qoq to IDR3.58 tn, accounting for 23.0%/23.5% of ours/consensus. Lower EBITDA was mostly driven by +40.8% qoq in infrastructure expenses related to rental & service as well as maintenance, bringing margin to decline to 47.5%. Meanwhile, EXCL's early debt repayment from IDR5 tn from rights issue proceed has resulted in finance costs reduction by IDR210 bn qoq in 1Q23. This brought its CoF lowered from 8.0% in Dec '22 to 6.6% in 1Q23, leading to higher net profit +56.7% qoq /44.4% yoy, yet still below ours/consensus at 14.2%/11.3%. During analyst call, management announced structural transformation, planning to intensify synergy with LinkNet in order to boost fixed broadband penetration. (Source : Company) Comment: EXCL's 1Q23 flattish revenue might have caused by more competitive environment as data yield to remain under pressure to IDR3.1/MB beside seasonality factor. In addition, EXCL seemed to have upscale data package that might also have resulted in lower data yield. On the bright side, however, EXCL managed to add +400K subs qoq, which outperforms its peers, while maintaining blended ARPU at IDR39.4K in 1Q23. On transformation, this will allow EXCL to better focus on consumer products such as fixed broadband and cellular while minimizing capex requirement to expand these segments.