Equity Research

Company Update

Thursday,25 November 2021

BUY Telkom Indonesia (TLKM IJ)

Maintain Showing strength in all cylinders
Last price (IDR) 3,900 Telkom’s enterprise and consumer segments exhibited 2-digit QoQ & YoY
Target Price (IDR) 4,600 growth rates in 3Q, while TSEL laid the foundations for a turnaround and
digital momentum. The 3Q21 group EBITDA margin expanded to a record
Upside/Downside +17.9%
level, and 3Q21 net profits remained resilient at a high level too. The YTD 9M
Previous Target Price (IDR) - Telkom net profits beat estimates. Maintain strong BUY.
Stock Statistics Showing strength in all key segments. Telkom group reported 3Q21 revenues
Sector Telco of Rp36.6tn (+2.9%qoq and +10.5% yoy). The growth was backed by the
Enterprise revenues which reached Rp5.14tn (+12.5%qoq, +37.8%yoy). The
Bloomberg Ticker TLKM IJ
consumer segment has now recorded consistent growth every quarter in the
No of Shrs (mn) 100,800 last 2 years. Consumer revenues of Rp6.43tn in 3Q21 (+4.8%qoq, +18.3%yoy)
Mkt. Cap (IDRbn/USDmn) 393,120/27,611 were supported by growth in subscribers reaching 8.5mn in 3Q and Indihome’s
Avg. daily T/O (IDRbn/USDmn) 312.8/22.0 steady growth in ARPU.
Telkomsel (TSEL) revenues were Rp21.2tn, remaining stable on a qoq basis.
Major shareholders (%) TSEL achieved digital business growth (data and digital revenues), but Legacy
Indonesian Govt. 52.1 biz revenues continued their structural decline eating away the quarterly
growth in digital. Mobile blended ARPU weakened in 3Q, but TSEL picked up an
additional 3.4mn subscribers in 3Q21 investing for the 4th quarter with
Estimated free float 47.9 seasonally more festive days and leisure time included for more data/digital
EPS Consensus (IDR) consumption; thus, we expect ARPU to recover accordingly.
2021F 2022F 2023F EBITDA and earnings: material contributions from non-mobile segments.
Danareksa 263.3 285.5 301.2 Group cash OPEX only increased by 1.1%qoq in 3Q21 to Rp16.4tn with
Consensus 232.9 258.5 288.0
significant OPEX improvements in the enterprise and consumer segments.
These led to expansion of the group’s EBITDA margin to 55.2%, the highest level
Danareksa/Cons 13.1 10.5 4.6
in recent years. The consumer EBITDA margin improved by ~600bps in 3Q21,
TLKM relative to JCI Index while the Enterprise EBITDA margin improved in the range of over 1,000bps,
we gather. Enterprise OP became positive in 3Q21.
Mitratel acquired external debt to acquire tower assets effectively increasing
group finance costs in 3Q, offsetting the aforementioned improvements. This
should be normalized with the use of Mitratel’s IPO proceeds in the foreseeable
future. Overall, net profits were flattish at Rp6.4tn (-0.2%qoq) showing
resiliency at record high levels.
Net profits beat; Strong BUY call. Telkom’s YTD 9M revenues of Rp106tn
(+6.1%yoy) and EBITDA results have trended inline with our FY21 estimate and
the consensus. Telkom and TSEL’s YTD 9M operating earnings were enhanced
with gains in the fair value of Gojek (Rp350bn). Telkom’s YTD 9M net profits
reached Rp18.9tn (+13.1%yoy) or trending inline with our FY21 estimate but
beating the consensus.
Source : Bloomberg

Key Financials
Year to 31 Dec 2019A 2020A 2021F 2022F 2023F
Revenue (IDRbn) 135,567 136,462 142,817 150,520 158,660
EBITDA (IDRbn) 64,832 72,080 75,690 79,678 84,014
EBITDA Growth (%) 9.5 11.2 5.0 5.3 5.4
Net profit (IDRbn) 18,664 20,804 26,086 28,283 29,841
EPS (IDR) 188.4 210.0 263.3 285.5 301.2
EPS growth (%) (0.6) 11.5 25.4 8.4 5.5
BVPS (IDR) 1,005.0 1,035.0 1,100.6 1,139.4 1,174.5
x Niko Margaronis DPS (IDR) 163.8 170.3 189.0 237.0 257.0
(62-21) 5091 4100 ext. 3512 PER (x) 20.7 18.6 14.8 13.7 12.9
PBV (x) 3.9 3.8 3.5 3.4 3.3
[email protected]
Dividend yield (%) 4.2 4.4 4.8 6.1 6.6
EV/EBITDA (x) 6.4 5.8 5.6 5.3 5.0
Source : TLKM, Danareksa Estimates

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 Exhibit 1. Revenues and Growth Exhibit 2. Net Profits and Growth

Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates

Exhibit 3. Margins Exhibit 4. Gearing Level

Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates

Exhibit 5. Telkom group (TLKM IJ) 3Q/9M21 revenues breakdown by service

(Rp bn) 3Q20 2Q21 3Q21 YoY, % YoY,% 9M20 9M21 YoY, %
Operating Revenue 33,085 35,535 36,563 2.9 10.5 99,941 106,043 6.1
Legacy business 5,920 5,301 5,431 2.5 (8.3) 18,945 15,985 (15.6)
Voice 4,686 4,199 4,206 0.2 (10.2) 15,139 12,756 (15.7)
Voice Cellular 4,139 3,744 3,685 (1.6) (11.0) 13,448 11,283 (16.1)
Voice Fixed 547 455 521 14.5 (4.8) 1,691 1,473 (12.9)
SMS 1,234 1,102 1,225 11.2 (0.7) 3,806 3,229 (15.2)
Interconnection 1,909 2,018 1,904 (5.6) (0.3) 6,030 5,748 (4.7)
Data, Internet & IT 17,309 19,327 19,444 0.6 12.3 52,647 57,016 8.3
Cellular 14,972 16,121 16,209 0.5 8.3 45,364 47,860 5.5
IT 1,910 2,603 2,507 (3.7) 31.3 6,101 7,196 17.9
Other 427 603 728 20.7 70.5 1,182 1,960 65.8
Indihome 5,744 6,532 6,759 3.5 17.7 16,113 19,638 21.9
Network 238 442 595 34.6 150.0 1,076 1,393 29.5
Other 1,278 1,309 1,802 37.7 41.0 3,527 4,429 25.6
Manage service andTerminal 422 266 721 171.1 70.9 714 1,432 100.6
Call center service 230 269 267 (0.7) 16.1 610 739 21.1
E-Health 133 147 165 12.2 24.1 408 458 12.3
E-payment 127 124 126 1.6 (0.8) 362 364 0.6
Others 366 503 523 4.0 42.9 1,433 1,436 0.2
Revenue from lease transactions
687 606 628 3.6 (8.6) 1,603 1,834 14.4
(Mitratel external revenue)

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 Exhibit 6. Telkom group (TLKM IJ) 3Q/9M21 revenues breakdown by segment
(Rp bn) 3Q20 2Q21 3Q21 YoY, % YoY,% 9M20 9M21 YoY, %
Group Revenue 33,085 35,535 36,563 2.9 10.5 99,941 106,043 6.1
Mobile revenue 20,301 21,066 21,180 0.5 4.3 62,603 62,628 0.0
Consumer revenue 5,435 6,135 6,431 4.8 18.3 15,206 18,539 21.9
Enterprise revenue 3,731 4,572 5,142 12.5 37.8 11,465 13,816 20.5
Wholesale Int. (WIB) revenue 3,418 3,550 3,605 1.5 5.5 10,233 10,502 2.6
Other/eliminations revenue 200 212 -119 (156.1) (159.5) 434 234 (46.1)

Exhibit 7. Telkom group (TLKM IJ) 3Q/9M21 P&L statement

Achiev, 2021 Achiev,
Rp bn 3Q20 2Q21 3Q21 ΥοΥ, % YoY,% 9M20 9M21 ΥοΥ, % 2021F
% Cons %
Operating Revenue 33,085 35,535 36,563 2.9 10.5 99,941 106,043 6.1 141,625 74.9% 141,456 75.0%

Total Cash OPEX (15,576) (16,585) (16,395) (1.1) 5.3 (46,355) (48,116) 3.8
Total Operating Expense (22,327) (23,619) (23,877) 1.1 6.9 (66,930) (69,742) 4.2
O&M (8,871) (9,021) (9,505) 5.4 7.1 (25,098) (26,978) 7.5
D&A (7,111) (7,412) (7,485) 1.0 5.3 (21,038) (22,183) 5.4 -28,892
Personnel (3,390) (3,870) (3,648) (5.7) 7.6 (10,406) (11,018) 5.9
Marketing (900) (774) (842) 8.8 (6.4) (2,356) (2,371) 0.6
Others (2,055) (2,542) (2,397) (5.7) 16.6 (8,032) (7,192) (10.5)

Operating Profit 10,758 11,916 12,686 6.5 17.9 33,011 36,301 10.0
Operating margin (%) 32.5 33.5 34.7 1.2 2.2 33.0 34.2 1.2
EBITDA 17,509 18,950 20,168 6.4 15.2 53,586 57,927 8.1 74,741 77.5% 74,713 77.5%
EBITDA margin (%) 52.9 53.3 55.2 1.8 2.2 53.6 54.6 1.0
Total other income (expenses) (1,019) (938) (1,220) 30.1 19.7 (3,257) (3,041) (6.6) -3,967

Pre-tax profit 9,739 10,978 11,466 4.4 17.7 29,754 33,260 11.8
Net profit 5,690 6,437 6,421 (0.2) 12.8 16,679 18,872 13.1 24,421 77.3% 22,569 83.6%
Net profit margin (%) 17.2 18.1 17.6 (0.6) 0.4 16.7 17.8 1.7

Total debt 61,768 78,983 68,502 (13.3) 10.9 61,768 68,502

Net debt 44,348 42,370 51,011 20.4 15.0 44,348 51,011
Net debt/EBITDA (x) 0.6 0.6 0.7 - - 0.6 0.7

Capex 5,912 6,084 6,751 - - 17,922 18,568 -

Capex intensity (%) 17.9 17.1 18.5 - - 17.9 17.5 -

Exhibit 8. Telkomsel (TSEL) 3Q/9M21 P&L statement

(Rp bn) 3Q20 2Q21 3Q21 QoQ, % YoY,% 9M20 9M21 YoY, %
Revenues (Rp bn) 21,125 21,958 21,976 0.1 4.0 65,134 65,148 0.0
Legacy business 5,334 4,923 4,827 (2.0) (9.5) 17,475 14,641 (16.2)
Digital business 15,791 17,035 17,149 0.7 8.6 47,659 50,508 6.0
Data 13,628 14,262 14,969 5.0 9.8 41,450 43,146 4.1
Digital 2,163 2,773 2,180 (21.4) 0.8 6,209 7,362 18.6
Expenses (13,811) (13,743) (13,151) (4.3) (4.8) (40,993) (39,403) (3.9)
OPEX (9,048) (9,104) (9,427) 3.5 4.2 (26,646) (27,244) 2.2
D&A (4,780) (5,009) (5,062) 1.1 5.9 (14,463) (15,102) 4.4
Other - net 17 370 1,338 261.6 7770.6 116 2,943 2437.1
EBITDA 12,077 12,854 12,549 (2.4) 3.9 38,488 37,906 (1.5)
EBITDA margin (%) 57.2 58.5 57.1 (1.4) 0.0 59.1 58.2 (0.9)
Net income 5,306 6,025 6,674 10.8 25.8 18,016 19,423 7.8
Net income margin (%) 25.1 27.4 30.4 2.9 0.0 27.7 29.8 2.2

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 Exhibit 9. Telkom group (TLKM IJ) 3Q/9M21 operational KPIs
3Q20 2Q21 3Q21 YoY, % QoQ,% 9M20 9M21 YoY, %
Mobile segment (mn)
Cellular Subscribers (mn) 170.1 169.2 173.5 2.6 2.0 170.1 173.5 2.0
3G/4G capable devices 132.2 118.7 130.7 10.1 (1.1) 132.2 130.7 (1.1)
Data users 117.3 117.7 120.9 2.7 3.1 117.3 120.9 3.1

Data KPIs
Data Traffic (Petabytes) 2,426 3,385 3,474 2.6 43.2 6,682 10,048 50.4
Average data usage (in gb) 7.3 9.7 9.7 0.0 33.5 -
Data Yield Rp('000) 6.5 5.0 4.9 (1.9) (24.2) -

Legacy KPIs
MoU (Total / Bn Minutes) 38.0 31.2 30.3 (2.9) (20.3) 114.7 94.6 (17.5)
Revenue/minute (Rp) 123 135 139 3.1 12.6 -
Monthly MOU/sub 74 61 58 (5.3) (21.8) -
SMS (Total / Bn Units) 11.3 7.9 6.2 (21.5) (45.1) 30.9 20.7 (33.0)
Revenue/SMS (Rp) 109 139 198 41.6 80.9 -
Monthly SMS/Sub 22.1 15.6 11.9 (23.5) (46.2) -
ARPU Blended (Rp'000/month) 44 45 43 (4.4) (2.3) 45 44 (2.2)

Network KPIs ('000)

3G & 4G 178.1 187.0 195.5 4.5 9.7 178.1 195.5 9.7
4G BTS 100.2 123.9 132.3 6.8 32.0 100.2 132.3 32.0
3G BTS 77.9 63.2 63.2 (0.0) (18.9) 77.9 63.2 (18.9)
2G BTS 50.3 50.3 50.3 0.0 (0.1) 50.3 50.3 (0.1)
Total BTS 228.4 237.3 245.7 3.5 7.6 228.4 245.7 7.6
Fixed broadband segment
Indihome subs (mn) 7.8 8.3 8.5 1.9 9.0 7.8 8.5 9.0
Indihome ARPU (Rp'000/month) 253 270 274 1.5 8.3 -

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 Exhibit 10. Income Statement
Year to 31 Dec (IDRbn) 2019A 2020A 2021F 2022F 2023F
Revenue 135,567 136,462 142,817 150,520 158,660
COGS (81,144) (80,405) (84,102) (88,671) (93,833)
Gross profit 54,423 56,057 58,716 61,848 64,828
EBITDA 64,832 72,080 75,690 79,678 84,014
Oper. profit 42,394 43,505 46,936 49,268 51,426
Interest income 1,092 799 1,029 750 750
Interest expense (4,240) (4,520) (4,128) (3,648) (3,570)
Forex Gain/(Loss) 0 0 0 0 0
Income From Assoc. Co’s (1,338) (246) 0 0 0
Other Income (Expenses) 0 (763) 0 0 0
Pre-tax profit 37,908 38,775 43,837 46,370 48,606
Income tax (10,316) (9,212) (9,206) (9,274) (9,721)
Minority interest (8,928) (8,759) (8,545) (8,813) (9,044)
Net profit 18,664 20,804 26,086 28,283 29,841
Core Net Profit 18,664 20,804 26,086 28,283 29,841

Exhibit 11. Balance Sheet

Year to 31 Dec (IDRbn) 2019A 2020A 2021F 2022F 2023F
Cash & cash equivalent 18,242 20,589 12,455 10,509 15,036
Receivables 11,797 11,339 13,724 14,464 15,246
Inventory 585 983 746 786 829
Other Curr. Asset 10,544 12,289 11,901 15,972 16,836
Fixed assets - Net 156,973 160,923 166,689 171,432 175,055
Other non-curr.asset 22,513 39,517 29,698 34,608 32,153
Total asset 221,208 246,943 236,551 248,923 256,267

ST Debt 17,451 19,284 19,863 16,659 16,765

Payables 13,897 16,999 11,901 15,972 16,836
Other Curr. Liabilities 27,021 32,810 28,563 27,644 30,380
Long Term Debt 32,293 30,561 31,478 31,950 32,429
Other LT. Liabilities 13,296 26,400 15,150 20,775 17,962
Total Liabilities 103,958 126,054 106,955 113,000 114,372
Shareholder'sFunds 99,561 102,527 109,029 112,871 116,346
Minority interests 17,689 18,362 20,567 23,052 25,549
Total Equity & Liabilities 221,208 246,943 236,551 248,923 256,267

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 Exhibit 12. Cash Flow
Year to 31 Dec (IDRbn) 2019A 2020A 2021F 2022F 2023F
Net income 18,664 20,804 26,086 28,283 29,841
Depreciation and Amort. 23,178 28,892 28,753 30,410 32,588
Change in Working Capital 7,345 6,457 (11,139) (1,515) 1,951
OtherOper. Cash Flow 3,148 3,721 3,099 2,898 2,820
Operating Cash Flow 52,335 59,874 46,800 60,077 67,201

Capex (28,558) (11,710) (32,751) (33,562) (34,620)

Others Inv. Cash Flow (1,741) (16,205) 10,848 (4,159) 3,205
Investing Cash Flow (30,299) (27,915) (21,903) (37,721) (31,415)

Net change in debt 10,069 13,205 (9,755) 2,894 (2,228)

New Capital 256 0 0 0 0
Dividend payment (16,230) (16,875) (18,724) (23,477) (25,455)
Other Fin. Cash Flow (6,983) (4,810) (2,784) (2,126) (1,985)
Financing Cash Flow (12,888) (8,480) (31,263) (22,709) (29,667)

Net Change in Cash 9,148 23,479 (6,366) (354) 6,119

Cash - begin of the year 17,439 18,242 20,589 12,455 10,509
Cash - end of the year 18,242 20,589 12,455 10,509 15,036

Exhibit 13. Key Ratios

Year to 31 Dec 2019A 2020A 2021F 2022F 2023F
Growth (%)
Sales 3.7 0.7 4.7 5.4 5.4
EBITDA 9.5 11.2 5.0 5.3 5.4
Operating profit 7.1 2.6 7.9 5.0 4.4
Net profit (0.6) 11.5 25.4 8.4 5.5
Profitability (%)
Gross margin 40.1 41.1 41.1 41.1 40.9
EBITDA margin 47.8 52.8 53.0 52.9 53.0
Operating margin 31.3 31.9 32.9 32.7 32.4
Net margin 13.8 15.2 18.3 18.8 18.8
ROAA 8.7 8.9 10.8 11.7 11.8
ROAE 18.8 20.6 24.7 25.5 26.0
Leverage
Net Gearing (x) 0.3 0.2 0.3 0.3 0.2
Interest Coverage (x) 10.0 9.6 11.4 13.5 14.4

Source : TLKM, Danareksa Estimates

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