Company Coverage
Telkom Indonesia (TLKM IJ): Guidance Maintained With Dividend Upside
BUY (Maintained)
Current price:
Target price:
Upside:
Rp2,650
Rp3,600
35.8%
Analyst
Analyst
Highlights
- Guidance maintained despite slightly stronger revenue growth. Management continues prioritising EBITDA margin expansion through pricing discipline and cost optimisation despite 1H26 revenue exceeding guidance.
- Dividend upside remains supported. The stock offers an attractive potential 9.3% dividend yield, with further potential from value realisation dividends backed by ongoing asset monetisation.
- Maintain BUY with an unchanged target price at Rp3,600 based on 5.4x EV/EBITDA, in line with the five-year historical average.
Analysis
- Guidance maintained though operationally improving. Telkom Indonesia’s (TLKM) management maintained its 2026 guidance despite 1H26 revenue growing 3.9% yoy, above its 1-3% target, as the company remains focused on improving profitability rather than maximising revenue growth. Mobile average revenue per user (ARPU) increased 2.0% qoq and 11.6% yoy to Rp46,000 in 2Q26, more than offsetting a 0.1% qoq (3.1% yoy) decline in mobile subscribers to 153.5m, reflecting continued pricing discipline. Meanwhile, the reported 8% qoq decline in fixed broadband subscribers was driven by a one-off clean-up of inactive IndiHome accounts rather than weaker demand. Management also retained its guidance as capex is expected to remain at the higher end of the guidance following the recent spectrum acquisition. Separately, early retirement programme (ERP)-related restructuring costs may continue to pressure near-term earnings, although we expect the programme to improve operating efficiency over time, particularly as Telkomsel contributes around 72% of group revenue while accounting for only about 30% of TLKM's workforce.
- Attractive dividend yield with further upside from value realisation. TLKM is expected to offer a dividend yield of around 9.3% in 2027 if assuming same payout ratio with 2025 earnings, supported by the non-cash nature of its higher depreciation expense and resilient free cash flow generation. Management also reiterated its ability to give out elevated dividends going forward, while additional upside could come from future value realisation dividends (VRD) funded by asset monetisation. Following the AdMedika divestment, which contributed a one-off after-tax gain of Rp410bn in 1H26, management now targets the completion of Telkom Infranexia (TIF) Phase 2 in 2H26 before progressing with a strategic partnership. Meanwhile, the planned stake sale of the data centre business remains under evaluation as capacity expansion continues, leaving several asset monetisation opportunities in the pipeline to potentially support future VRD.
- Improving quarterly profitability despite restructuring. TLKM reported a stronger 2Q26, with revenue increasing 4.0% qoq, driven primarily by mobile revenue (+5.3% qoq), supported by growth in network (+4.4% qoq) and other businesses (+3.3% qoq), while IndiHome consumer revenue declined slightly (-0.7% qoq) following the revision to its FBB subscriber definition. EBITDA margin improved to 50.9% from 47.4% in 1Q26, supported by higher revenue and a 2.4% qoq decline in operating expenses, partly offset by higher depreciation. Lower fair value losses and higher other income also contributed to earnings, resulting in EBIT margin increasing to 29.0% from 24.0% and net profit rising 44.5% qoq, further supported by the Rp410b after-tax gain from the AdMedika divestment. On a 1H26 basis, revenue grew 3.9% yoy, above management's full-year guidance, while EBITDA margin remained broadly stable at 49.2%.
Highlights
- Guidance maintained despite slightly stronger revenue growth. Management continues prioritising EBITDA margin expansion through pricing discipline and cost optimisation despite 1H26 revenue exceeding guidance.
- Dividend upside remains supported. The stock offers an attractive potential 9.3% dividend yield, with further potential from value realisation dividends backed by ongoing asset monetisation.
- Maintain BUY with an unchanged target price at Rp3,600 based on 5.4x EV/EBITDA, in line with the five-year historical average.
Analysis
- Guidance maintained though operationally improving. Telkom Indonesia’s (TLKM) management maintained its 2026 guidance despite 1H26 revenue growing 3.9% yoy, above its 1-3% target, as the company remains focused on improving profitability rather than maximising revenue growth. Mobile average revenue per user (ARPU) increased 2.0% qoq and 11.6% yoy to Rp46,000 in 2Q26, more than offsetting a 0.1% qoq (3.1% yoy) decline in mobile subscribers to 153.5m, reflecting continued pricing discipline. Meanwhile, the reported 8% qoq decline in fixed broadband subscribers was driven by a one-off clean-up of inactive IndiHome accounts rather than weaker demand. Management also retained its guidance as capex is expected to remain at the higher end of the guidance following the recent spectrum acquisition. Separately, early retirement programme (ERP)-related restructuring costs may continue to pressure near-term earnings, although we expect the programme to improve operating efficiency over time, particularly as Telkomsel contributes around 72% of group revenue while accounting for only about 30% of TLKM's workforce.
- Attractive dividend yield with further upside from value realisation. TLKM is expected to offer a dividend yield of around 9.3% in 2027 if assuming same payout ratio with 2025 earnings, supported by the non-cash nature of its higher depreciation expense and resilient free cash flow generation. Management also reiterated its ability to give out elevated dividends going forward, while additional upside could come from future value realisation dividends (VRD) funded by asset monetisation. Following the AdMedika divestment, which contributed a one-off after-tax gain of Rp410bn in 1H26, management now targets the completion of Telkom Infranexia (TIF) Phase 2 in 2H26 before progressing with a strategic partnership. Meanwhile, the planned stake sale of the data centre business remains under evaluation as capacity expansion continues, leaving several asset monetisation opportunities in the pipeline to potentially support future VRD.
- Improving quarterly profitability despite restructuring. TLKM reported a stronger 2Q26, with revenue increasing 4.0% qoq, driven primarily by mobile revenue (+5.3% qoq), supported by growth in network (+4.4% qoq) and other businesses (+3.3% qoq), while IndiHome consumer revenue declined slightly (-0.7% qoq) following the revision to its FBB subscriber definition. EBITDA margin improved to 50.9% from 47.4% in 1Q26, supported by higher revenue and a 2.4% qoq decline in operating expenses, partly offset by higher depreciation. Lower fair value losses and higher other income also contributed to earnings, resulting in EBIT margin increasing to 29.0% from 24.0% and net profit rising 44.5% qoq, further supported by the Rp410b after-tax gain from the AdMedika divestment. On a 1H26 basis, revenue grew 3.9% yoy, above management's full-year guidance, while EBITDA margin remained broadly stable at 49.2%.
BUY (Maintained)
Current price:
Target price:
Upside:
Rp2,650
Rp3,600
35.8%
Analyst
Analyst
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