13th July 2026

BUY, 59% upside

Price Rp 2480

Target price Rp3950

Investment Considerations

Mobile ARPU Improvement continues

• PT Telkom Indonesia (Persero) Tbk (TLKM) reported revenue growth of 1.5% YoY to IDR37.18 trillion in 1Q26, driven mainly by continued improvement in mobile ARPU.
• The Data, Internet & IT Services segment recorded strong growth of 10.9% YoY to IDR23.64 trillion, reflecting the positive impact of the market repair strategy on mobile performance. Despite a 1.5% QoQ decline in mobile subscribers to 156.1 million, mainly due to churn following starter-pack rationalization, mobile ARPU increased 6.4% YoY to IDR45,000. In March 2026, ARPU reached IDR47,000, supported by stronger seasonal demand during the festive period. Meanwhile, data payload remained broadly stable at 5,770 PB.
• IndiHome revenue declined 4.3% YoY to IDR6.38 trillion, mainly due to softer ARPU. The subscriber base increased 10% YoY to 10.06 million, while ARPU declined 8.9% YoY to IDR220,300 amid intense competition and continued optimization of entry-level packages.
• Overall, TLKM’s 1Q26 revenue performance remained broadly in line with management’s FY2026 growth guidance of 1%–3%.

Further streamlining Initiatives in 2026

• TLKM completed its target to streamline 10 subsidiaries in 1H26 as part of its commitment to the state-owned enterprise restructuring initiative led by Danantara Asset Management (DAM) and the SOE Regulatory Agency (BP BUMN).
• As part of this process, TLKM completed the sale of AdMedika and TelkoMedika in June 2026.
• Phase 1 of the Infranexia asset transfer was completed in December 2025. Phase 2 is now expected to be completed in 3Q26, slightly later than originally planned due to ongoing asset cleanup and licensing requirements.
• The company is also evaluating further industry consolidation opportunities during FY2026, followed by plans to seek a strategic partner for its fiber business.
• Progress continues in identifying a strategic partner for the data center business. Shortlisted foreign partners could potentially acquire up to 70% of the business, with management targeting transaction completion by year-end.

Q1 2026 Results: Margin Pressured by Higher Costs and Non-Cash Items

• TLKM recorded net profit of IDR4.34 trillion in 1Q26, declining 25.2% YoY, with net profit margin contracting to 11.7%.
• The decline was mainly attributable to higher depreciation and amortization expenses following revisions to asset useful lives, resulting in an additional IDR498 billion impact, together with a negative IDR309 billion unrealized mark-to-market impact on investments.
• After adjusting for non-recurring and non-cash items, core profit reached IDR5.13 trillion, declining 8.0% YoY, with core net profit margin at 13.8%.
• EBITDA declined 1.4% YoY to IDR18.0 trillion, with EBITDA margin at 48.3%. The weaker margin primarily reflected a 15.5% YoY increase in operating and maintenance expenses.
• Nevertheless, cost discipline remains a key management priority, supported by continued subsidiary streamlining and further optimization of both capital expenditure and operating expenditure.

Valuation: Maintain BUY, TP IDR 3,950 (+59% Upside)

• We maintain our BUY recommendation on TLKM with a 12-month target price of IDR3,950, implying 59% upside from the current share price.
• Our valuation is based on a 16x forward P/E multiple, supported by continued mobile ARPU recovery, improving industry pricing discipline, ongoing portfolio streamlining, and potential value realization from strategic partnerships in the fiber and data center businesses.