TLKM – Accelerates cost reduction through infrastructure overhaul and integration

TLKM – Accelerates cost reduction through infrastructure overhaul and integration Telekomunikasi Indoesia (TLKM)'s Five Bold Moves strategy is advancing with the establishment of PT Infrastruktur Telekomunikasi Indonesia in Dec-23 for network optimization and Telkom Data Ekosistem in 1Q24 for data center consolidation. These initiatives are designed to enhance profitability by reducing costs and improving operational efficiency. Following the implementation of a new wholesale agreement to facilitate Telkomsel-IndiHome integration, TLKM's 1Q24 financial results show a 7.1% yoy increase in total expenses to IDR26.42 tn. However, these expenses normalized on a qoq basis, declining by 7.5% compared to the previous quarter, indicating successful management and optimization during the integration process. Opex followed a similar trend, while it grew 5.3% yoy to IDR18.01 tn, this increase also normalized qoq, with a decrease of 7.5%. TLKM’s management views this agreement favorably as it provides IndiHome with privileged access to TLKM's extensive and nationwide infrastructure, enabling cost savings, expanded digital reach, and potential subs growth through improved overall digital connectivity. (Source : Company) Comment : Due to cost-optimization, we project total expenses to increase by only 2.7% yoy in FY24, compared to a 12.6% yoy increase in FY22. Similarly, opex are expected to rise by 3.5% yoy, lower than 4.9% yoy growth in FY23. By FY24F, we forecast operating profit to grow 6.5% yoy to IDR47.29 tn, with an improved margin of 30.5% compared to 29.7% in FY23. Following inline 1Q24 results that met our/consensus expectations, we maintained our FY24 revenue forecast at IDR154.94 tn (+3.8% yoy). Meanwhile, EBITDA is projected at IDR80.76 tn (+4.1% yoy). Our FY24 net profit estimates increase by 4.2% yoy to IDR25.60 tn, with a stable net margin at 16.5%. Maintain our BUY call with a TP of IDR4,000, based on 4.9x 2024F EV/EBITDA (-1SD 7yrs-historical mean)