Stock Recommendation for TLKM: Supported by Data Growth and Customer Traffic,

STOCK RECOMMENDATION - JAKARTA. The performance of PT Telkom Indonesia (Persero) Tbk (TLKM) is predicted to grow positively in 2024. This is supported by the growth of customer traffic data.

Phillip Capital analyst Edo Ardiansyah said, this is also supported by TLKM's revenue, which rose slightly by 2.2% year on year (YoY), mainly supported by data, Internet, and IT which increased by 5.3% YoY.

"Then Indi Home services also increased by 4.3% YoY, supported by extraordinary growth from the Interconnection segment, which increased by 7.8% YoY, and other service networks which also increased by 12.2% YoY," Edo said in his research, on January 4, 2024.

However, Edo said, the SMS, fixed telephone, and mobile phone segments continue to decline, where they fell 20.87% YoY due to the increasing popularity of Over-The-Top (OTT) applications and the ongoing transition from old applications to data.

Even so, he mentioned that TLKM's net profit jumped 17.6% YoY is on the right track, and exceeded the target throughout 2023.

Not only that, Edo said, the net profit margin (NPM) also increased to 17.5% from 15.2% in the same period last year.

Even TLKM has completed the process of upgrading 3G to 4G services (3G shutdown) with a total of 233,052 BTS, including 183,621 4G BTS that reach more than 97% of the population throughout Indonesia.

Edo hopes that TLKM's cellular business can maintain its positive trend, supported by the continuously increasing customer traffic data. However, in terms of internet penetration, Indonesia is still lagging behind some other Asian countries.

Therefore, he said that this is a great opportunity for the telecommunications sector, where it is estimated that the growth of data centers in Indonesia can increase from US$ 2.06 billion in 2023 to US$ 3.98 billion in 2028, with a CAGR of 14.09%.

"The growth rate of customers and ARPU throughout 2023 and 2024 is also projected to increase after a positive correlation between the Election and cellular data payload," he said.

Furthermore, Edo said that the company has not only completed the integration of Indihome into Telkomsel but is now also preparing a strategy with digital IT B2B transformation and data center development in line with the growth of the industry in Indonesia.

Therefore, Edo is optimistic that this will make TLKM throughout 2023 and 2024, projected to generate revenue growth of up to IDR 151 trillion - IDR 157 trillion, or an increase of 2.97%-3.51%.

“Where the EBITDA margin is 53% and capital expenditure is in the range of IDR 35 trillion-IDR 45 trillion," said Edo.

For this reason, Edo recommends Buy for TLKM with a target price of IDR 4,800 per share, with a potential increase of 20.60%.

In line with this, the Director of Research and Investment Association Pilarmas Investindo, Maximilianus Nico Demus sees the prospects for TLKM's performance and shares are still positive this year, especially ahead of the Eid al-Fitr moment, which will drive telecommunications traffic up a range of 5% - 10%.

"Especially the allocation of Capital Expenditure or capex is also planned to be focused on the deployment of fiber, SKKL submarine cables, BTS, and others," Nico told Kontan.co.id, Monday (18/3).

According to him, this will boost the resilience of infrastructure and devices so that users can enjoy TLKM's network more optimally.

"Then, what makes it even more interesting is, that TLKM will strive to utilize AI technology in serving consumers so that it can provide solutions and increase efficiency," said Nico.

Not stopping there, Nico said, TLKM will also develop Internet of Things business, Cloud to the applications they have. Therefore, it seems, TLKM's performance is projected to improve supported by the development to expand the internet network in Indonesia.

Nico also recommends Buy for TLKM with a target price of 4,600 per share.

Meanwhile, Head of Equity Research Kiwoom Securities Indonesia, Sukarno Alatas sees that the prospects for TLKM shares will always be positive, considering that TLKM has solid performance. Where TLKM shows stable performance and managed to grow well from the top and bottom line until September 2023 (9M2023).

In addition, Sukarno said the opportunity for digital transformation also has high growth potential. Then the driving sentiment is that TLKM will launch 5G commercially in 2024 and the increase in internet penetration is projected to have an impact on revenue growth.

"The prospects for TLKM's performance this year are quite good. The opportunity comes from the increase in internet penetration in Indonesia, with TLKM's revenue growth predicted to reach IDR 151 trillion-IDR 157 trillion, or an increase of 2.97%-3.51%," Sukarno told Kontan.co.id, Monday (18/3).

Sukarno explained the level of internet penetration in Indonesia increased to 79.5% from 78.19% in 2024. Then, the government's policy of aggressively building telecommunications infrastructure in remote areas will open new opportunities and expand reach.

Sukarno also recommends Buy TLKM shares, with a target price of IDR 4,450 per share.