Stock Recommendations: EXCL's Performance Predicted to Grow Positively in 2024

STOCK RECOMMENDATION - JAKARTA. PT XL Axiata Tbk, a leading telecommunications operator, (EXCL) has reported a double-digit revenue growth of Rp 32.4 trillion, marking a 10.9% increase year on year (YoY) in 2023.

This performance is primarily driven by monetization efforts that include digitalization initiatives and customer experience personalization, as well as price adjustments.

The revenue increase is also supported by the data and digital services segment, which saw growth throughout 2023, along with the robust managed service and IT as the newest business segments.

MNC Securities' Research Analyst Vera stated that EXCL also managed to record a net profit growth of 14.6% YoY in 2023, compared to a decrease of 13.85% YoY in the previous year.

Vera predicts that in 2024, EXCL's revenue could increase by 7.4% and EBITDA could also rise by 7.6%, in line with management's target to achieve single-digit net profit and an EBITDA margin of 50%.

“Our rationale stems from the more constructive competitive landscape in the recent MNO market, and EXCL's stable customer base, which positions it for further monetization opportunities in the future,” Vera said in her research, April 4, 2024.

Furthermore, Vera stated that EXCL also targets a capital expenditure of Rp 8 trillion to be capitalized throughout 2024. This figure is larger than the realization of capital expenditure in 2023, which was Rp 7.2 trillion.

On the other hand, EXCL is predicted to be more profitable this year, in line with its plan to take over the fixed broadband business line of PT Link Net Tbk (LINK), including its 750,000 customers.

Maximilianus Nico Demus, Associate Director of Research and Investment at Pilarmas Investindo, said that this plan has the potential to boost EXCL's performance even further this year. Moreover, 750 thousand Fixed Broadband customers can enjoy various products and services from EXCL.

“Link is also preparing to build a new network for 2 million homes passed that can be utilized by EXCL in the future. Therefore, this is in line with XL's focus on accelerating the growth of FBB and FMC services in Indonesia,” Nico told Kontan.co.id, Monday (22/4).

Nico believes that this will have a positive impact on EXCL in the future, with the hope that integration can proceed smoothly and quickly.

Nico predicts that EXCL's performance this year will continue to grow positively, in line with the company's financial growth which has been increasing for the past 5 years, both in terms of revenue and net profit. However, this performance declined during the Covid-19 pandemic.

“So far, if we look at it since 2018, total revenue has continued to increase, supported by a significant increase in operating profit from 2022 to 2023. Therefore, this year's performance is also believed to be able to soar,” said Nico.

Nico is optimistic that this year, EXCL's performance can grow positively because this telecommunications issuer always knows how to provide the best service to the community.

Starting from joining with youth-based Axis, preparing XL Prioritas for the upper middle class, to the ecosystem they built makes the user experience much more enjoyable.

Furthermore, Nico stated that EXCL demonstrated its ability to maintain service performance, evidenced by an 11% surge in traffic during the 2024 Election, compared to regular days.

“This places EXCL as the second highest among other MNOs, with Indosat leading with a traffic increase of 12%, followed by Telkomsel at 8.4%,” he revealed.

Not only that, he mentioned, traffic during Eid al-Fitr also increased by 7%-20% this year. Reflecting on last year's Eid, XL also managed to record a 30% increase in data traffic, followed by Indosat at 25%, Smartfren 14%, and Telkomsel 11%.

In line with this, Sukarno Alatas, an Analyst at Kiwoom Securities, also sees that the prospects for EXCL's performance will grow positively this year, in line with the successful projected acquisition of Link Net, which has the potential to generate substantial revenue.

“Meanwhile, the price prospects in line with the estimated growth performance and with the valuation conditions that tend to be cheaper, from the PBV side compared to peers this, have the opportunity to make the price more attractive,” Sukarno said when contacted by Kontan.co.id, Monday (22/4).

Sukarno mentioned, that positive sentiment to support EXCL's performance this year, comes from the predicted increase in revenue, the acquisition business of Link Net, and service expansion.

Sukarno recommends trading buy for EXCL with a target price of Rp 2,500 per share. Meanwhile, Nico recommends buying for EXCL with a target of Rp 2,800 per share.