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XL Axiata (EXCL IJ) (Buy) - EXCL – Post FY24 results update

XL Axiata (EXCL IJ) (Buy) - EXCL – Post FY24 results update

Telco EW 398 7th Feb, 2025

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EXCL – Post FY24 results update

We adjust earnings projections post-FY24 results

XL released its FY24 results which showed punchy performance. Headline FY24 profit came to IDR1.8tn (+45% y-y) driven by strong top line growth. Indeed, FY24 gross revenue came to IDR34.4tn (+6% y-y) with data (and value-added services) revenue coming to IDR32.0tn (+7% y-y). In 4Q24, XL also started consolidating revenue from broadband services FirstMedia (unlisted) which we estimate to be around IDR500bn per quarter (based on a subscription base of ~750K with average ARPU of IDR250K per month). Headline FY24 EBITDA is at IDR17.9tn (+13% y-y) – implying margin improvement to 52.0% (+290bp y-y).

Post the FY24 results, we update our earnings projections to adjust the actual FY24 numbers. We also add a new forecast year, FY27F.

XL expects to conclude the merger plan with SmartFren (FREN IJ, Not rated) by the end of 2Q25E. We think the merger could bring positive values and could enhance the company’s market positioning. Specifically, we think the merged entity would have the largest low-band spectrum bandwidth of ~37MHz, compared with its two main competitors Indosat (ISAT IJ, Buy) and Telkom Indonesia (TLKM IJ, Buy) (at ~25-30MHz low band spectrum bandwidth). Specifically, low-band spectrums would be more suitable for coverage areas, and could help the company to further increase its market share outside Java as low-band spectrums have wider network coverage. Post-results, we maintain our Buy rating and TP of IDR2,600.

Valuations and risks

Our TP of IDR2,600 is based on a DCF analysis, using a risk-free rate of 6.2%, an equity risk premium of 7.4%, and a terminal growth rate of 2.5%. This results in a WACC of 9.4%. At our TP, the stock would trade at 2025F EV/EBITDA of 4.1x (compared to 3.9x at the current price). Downside risks include adverse macro conditions, lower customer spending, less service price hikes leading to lower data prices, irrational competition behavior, and/or higher opex.

Year-end 31 DecFY24FY25FFY26FFY27F
Currency (IDR)ActualOldNewOldNewOldNew
Revenue (bn)34,39236,31536,07038,65937,486037,914
Reported net profit (bn)1,8192,1022,0652,6132,67402,891
Normalised net profit (bn)1,8192,1022,0652,6132,67402,891
FD normalised EPS138.56160.08157.28199.04203.70220.22
FD norm. EPS growth (%)44.753.313.524.329.58.1
FD normalised P/E (x)16.4–14.4–11.1–10.3
EV/EBITDA (x)4.2–3.9–3.6–3.5
Price/book (x)1.1–1.1–1.0–1.0
Dividend yield (%)1.8–3.1–3.5–4.5
ROE (%)6.97.57.88.89.59.8
Net debt/equity (%)171.5145.9155.1126.3136.9121.8
Source: Company data, Verdhana estimates

Key data on XL Axiata

Income statement (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Revenue
32,323
34,392
36,070
37,486
37,914
Cost of goods sold
-26,291
-26,698
-27,886
-28,378
-28,387
Gross profit
6,031
7,693
8,184
9,108
9,527
SG&A
-251
-369
-419
-469
-519
Employee share expense
-1,402
-1,736
-1,866
-2,006
-2,157
Operating profit
4,378
5,589
5,899
6,633
6,852
EBITDA
15,885
17,880
18,600
19,213
19,331
Depreciation
-11,506
-12,291
-12,702
-12,580
-12,479
Amortisation
0
0
0
0
0
EBIT
4,378
5,589
5,899
6,633
6,852
Net interest expense
-2,840
-3,033
-3,215
-3,168
-3,109
Associates & JCEs
0
0
0
0
0
Other income
152
-129
0
0
0
Earnings before tax
1,690
2,427
2,684
3,465
3,743
Income tax
-420
-580
-590
-762
-823
Net profit after tax
1,270
1,848
2,093
2,703
2,920
Minorities
-13
-29
-29
-29
-29
Other items
0
0
0
0
0
Preferred dividends
0
0
0
0
0
Normalised NPAT
1,257
1,819
2,065
2,674
2,891
Extraordinary items
0
0
0
0
0
Reported NPAT
1,257
1,819
2,065
2,674
2,891
Dividends
-635
-544
-910
-1,032
-1,337
Transfer to reserves
622
1,275
1,155
1,642
1,554
Valuations and ratios
Reported P/E (x)
23.7
16.4
14.4
11.1
10.3
Normalised P/E (x)
23.7
16.4
14.4
11.1
10.3
FD normalised P/E (x)
23.7
16.4
14.4
11.1
10.3
Dividend yield (%)
2.1
1.8
3.1
3.5
4.5
Price/cashflow (x)
3.4
2.6
1.9
1.9
1.9
Price/book (x)
1.1
1.1
1.1
1.0
1.0
EV/EBITDA (x)
4.7
4.2
3.9
3.6
3.5
EV/EBIT (x)
17.1
13.3
12.2
10.4
9.8
Gross margin (%)
18.7
22.4
22.7
24.3
25.1
EBITDA margin (%)
49.1
52.0
51.6
51.3
51.0
EBIT margin (%)
13.5
16.2
16.4
17.7
18.1
Net margin (%)
3.9
5.3
5.7
7.1
7.6
Effective tax rate (%)
24.9
23.9
22.0
22.0
22.0
Dividend payout (%)
50.5
29.9
44.1
38.6
46.3
ROE (%)
4.8
6.9
7.8
9.5
9.8
ROA (pretax %)
5.2
6.5
7.0
7.9
8.2
Growth (%)
Revenue
10.8
6.4
4.9
3.9
1.1
EBITDA
11.6
12.6
4.0
3.3
0.6
Normalised EPS
12.1
44.7
13.5
29.5
8.1
Normalised FDEPS
12.1
44.7
13.5
29.5
8.1
Source: Company data, Verdhana estimates
Cashflow statement (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
EBITDA
15,885
17,880
18,600
19,213
19,331
Change in working capital
-3,450
-2,325
626
482
440
Other operating cashflow
-3,565
-4,169
-3,805
-3,931
-3,933
CF from operations
8,870
11,386
15,421
15,764
15,838
Capital expenditure
-10,425
-12,500
-12,000
-12,000
-12,000
Free cashflow
-1,555
-1,114
3,421
3,764
3,838
Reduction in investments
0
0
0
0
0
Net acquisitions
0
0
0
0
0
Dec in other LT assets
0
0
0
0
0
Inc in other LT liabilities
0
0
0
0
0
Adjustments
-1,569
3,575
-1,117
-29
-29
CF after investing acts
-3,124
2,461
2,305
3,736
3,810
Cash dividends
-635
-544
-910
-1,032
-1,337
Equity issue
0
-1,499
0
0
0
Debt issue
0
0
0
0
0
Convertible debt issue
0
0
0
0
0
Others
-458
3
0
0
0
CF from financial acts
-1,094
-2,040
-910
-1,032
-1,337
Net cashflow
-4,218
421
1,395
2,703
2,473
Beginning cash
5,184
966
1,387
2,782
5,485
Ending cash
966
1,387
2,782
5,485
7,958
Ending net debt
44,952
44,701
42,218
39,515
37,042
Balance sheet (IDRbn)
As at 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Cash & equivalents
966
1,387
2,782
5,485
7,958
Marketable securities
0
0
0
0
0
Accounts receivable
1,735
2,175
2,266
2,343
2,366
Inventories
378
194
203
207
209
Other current assets
4,395
4,680
4,680
4,680
4,680
Total current assets
7,474
8,436
9,931
12,716
15,213
LT investments
0
0
0
0
0
Fixed assets
63,890
61,034
60,333
59,753
59,274
Goodwill
0
0
0
0
0
Other intangible assets
0
0
0
0
0
Other LT assets
16,624
16,708
16,708
16,708
16,708
Total assets
87,988
86,179
86,972
89,177
91,196
Short-term debt
6,877
9,090
0
0
0
Accounts payable
9,383
8,251
8,643
8,839
8,898
Other current liabilities
4,327
3,675
4,010
4,378
4,782
Total current liabilities
20,586
21,017
12,653
13,216
13,681
Long-term debt
39,041
36,998
45,000
45,000
45,000
Convertible debt
0
0
0
0
0
Other LT liabilities
2,000
2,104
2,104
2,104
2,104
Total liabilities
61,628
60,118
59,756
60,320
60,784
Minority interest
0
0
0
0
0
Preferred stock
0
0
0
0
0
Common stock
18,093
16,593
16,593
16,593
16,593
Retained earnings
8,267
9,467
10,622
12,264
13,818
Proposed dividends
0
0
0
0
0
Other equity and reserves
0
0
0
0
0
Total shareholders' equity
26,360
26,060
27,216
28,857
30,411
Total equity & liabilities
87,988
86,179
86,972
89,177
91,196
Liquidity (x)
Current ratio
0.36
0.40
0.78
0.96
1.11
Interest cover
1.5
1.8
1.8
2.1
2.2
Leverage
Net debt/EBITDA (x)
2.83
2.50
2.27
2.06
1.92
Net debt/equity (%)
170.53
171.53
155.13
136.93
121.80
Per share
Reported EPS (IDR)
95.75
138.56
157.28
203.70
220.22
Norm EPS (IDR)
95.75
138.56
157.28
203.70
220.22
FD norm EPS (IDR)
95.75
138.56
157.28
203.70
220.22
BVPS (IDR)
2,007.95
1,985.10
2,073.10
2,198.16
2,316.52
DPS (IDR)
48.39
41.44
69.28
78.64
101.85
Activity (days)
Days receivable
14.6
20.8
22.5
22.4
22.7
Days inventory
5.5
3.9
2.6
2.6
2.7
Days payable
144.2
120.9
110.6
112.4
114.0
Cash cycle
-124.1
-96.1
-85.5
-87.3
-88.7
Source: Company data, Verdhana estimates
Company profileXL Axiata Tbk is an Indonesia-based mobile telecommunications services operator, headquartered in Jakarta. It is one of the largest mobile telecommunications companies in Indonesia. The operator's coverage includes Java, Bali, and Lombok, as well as the principal cities in and around Sumatra, Kalimantan and Sulawesi. XL offers data communication, broadband internet, and mobile communication.
Valuation MethodologyOur TP of IDR2,600 is based on DCF, using a risk-free rate of 6.2%, equity risk premium of 7.4%, and a terminal growth rate of 2.5%. The implied 2025F EV/EBITDA from our TP is 4.1x. The benchmark index for this stock is JCI.
Risks that may impede the achievement of the target priceDownside risks include adverse macro conditions, lower customer spending, less service price hikes leading to lower data prices, irrational competition behavior, and/or higher opex.
ESGXL Axiata has devised a sustainability framework within the 4P framework, namely: Building Prosperity, Nurturing People, Process Excellence, Planet and Society. Through Building Prosperity, XL Axiata aims to fashion an innovative digital 17 ecosystem to bridge the digital divide by envisaging the economic, environmental, and social aspects. To put it into practice, the company aims to ensure that Process Excellence, which is the development of a streamlined digitalization process with good governance, is able to increase the company's efficiency and business sustainability. In addition to economic development and processes, XL Axiata is involved in developing future leaders by increasing their internal competence, which is included in the sustainability framework of XL Axiata Nurturing People. XL Axiata prioritizes concern for the environment and society through the Planet and Society framework. The company has been improving its services and optimizing its local potential with social outreach programs to reduce the environmental impact. This sustainability policy and framework was instigated by establishing a sustainability road map design from year to year. This roadmap exemplifies XL Axiata’s long-term determination to always prioritize the company’s progress by cautiously implementing the principles of sustainability. In turn, this road map is translated into a variety of axes related to economic, social, and environmental programs. To ensure the achievement of its sustainability goals and the implementation of XL Axiata’s sustainable business, the company has  appointed special officials . Their duty is to guarantee that all policies and strategies implemented by XL Axiata are executed according to the set targets. XL Axiata believes that the implementation and development of a culture of sustainability can only take place within the framework of Good Corporate Governance (GCG) with the five principles of: transparency, responsibility, accountability, independence, and fairness. The company has developed a GCG Roadmap to ensure the implementation and development of GCG in the long run. The development of culture and sustainability praxis at XL Axiata undoubtedly lies upon the shoulders of every XL Axiata individual. For this reason, the company always endeavors to develop each and every employee’s competencies in sustainability topics through various trainings, such as training related to governance aspects: anticorruption training, national laws, and regulations concerning the FSA’s statutes. In the field of OHS, XL Axiata provides various trainings and simulations of dangerous situations, including the topic of COVID-19. These heterogenous trainings are given to employees according to their position and also to governance bodies.

Fig. 1: EXCL - results table


 EXCL QoQ IDRbn 4Q231Q242Q243Q244Q24QoQYoYYTD FY24YTD FY23YoY
 Gross rev 8,4438,4408,6128,3109,0308.77.034,39232,3236.4
 Cellular (ex I/C) 8,3148,0638,2587,7498,83114.06.232,90030,8146.8
 - Voice 166177178155152(1.7)(8.5)662740(10.6)
 - Non-voice 8,1477,8868,0797,5948,67914.36.532,23830,0747.2
   - Data&VAS 8,0887,8238,0167,5398,62514.46.632,00229,8107.4
           
 Opex 7,2947,0507,2187,0367,5006.62.828,80327,9443.1
 * Cellular costs 8407658216931,00545.019.63,2843,1723.5
 * Depreciation 2,9823,0643,1093,0653,053(0.4)2.412,29111,5066.8
 * Personnel costs 3433584614394799.239.71,7361,40223.8
 * Selling expenses 650533546510505(1.0)(22.3)2,0942,455(14.7)
 * Infrastructure 2,3382,2272,1742,2252,3174.1(0.9)8,9428,996(0.6)
           
 Op. inc 1,1481,3901,3941,2741,53120.133.35,5894,37827.6
 Margin 13.6%16.5%16.2%15.3%16.9%  16.2%13.5% 
 Margin (net) 13.6%16.5%16.2%15.3%16.9%  16.2%13.5% 
 EBITDA 4,1304,4544,5034,3394,5835.611.017,88015,88512.6
 Margin 48.9%52.8%52.3%52.2%50.8%  52.0%49.1% 
 Margin (net) 48.8%52.8%52.3%52.2%50.8%  52.0%49.1% 
           
 PBT 44067766141667362.053.12,4271,69043.6
 Margin 5%8%8%5%7%  7%5% 
        00 
 Net profit 24653948629250272.2103.91,8191,25744.7
Source: Company data, Verdhana estimates

 

Fig. 2: EXCL - operational data table

 EXCL Operational data 4Q231Q242Q243Q244Q24Q-QY-YYTD 2024YTD 2023YoY
 Total subs ('000)    57,500    57,600    58,500    58,600    58,8000.32.3   
 ARPU IDR    43,000    44,000    44,000    41,000    41,0000.0(4.7)   
 Data traffic (PB)      2,529      2,609      2,660      2,554      2,7246.77.710,5479,6389.4
 Data yield IDR/MB           3.0           3.0           3.0           3.0           3.0     
 Data ARPU IDR     41,024     42,690     42,700     39,821     39,352(1.2)(4.1)   
 HomeConnect ('000)         207         252         267         289      1,024254.3394.7   
 Data (ex VAS)     29,398       7,823     15,838     23,377     31,57835.17.4   
 Data as % of rev (RHS)         91.0         92.7         92.9         92.2         91.8(0.4)1.0   
 Capex 7,1582,0574,1456,6857,38210.43.1   
 Capex as % of rev (RHS)       22.15         24.4         24.3         26.4         21.5(18.6)(3.1)   
 Net debt (cash)     44,975     44,897     44,053     44,809     44,701(0.2)(0.6)   
 Net debt to equity %          171          167          165          175          172     
 Net debt to EBITDA x           2.7           2.5           2.4           2.6           2.4     
 Total BTS    160,124    163,106    163,884    165,094    165,8640.53.6   
 3G/4G BTS    106,050    108,283    109,547    110,654    111,3430.65.0   
Source: Company data, Verdhana research

 

Fig. 3: EXCL - earnings changes

Source: Company data, Verdhana estimates

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

GENERAL DISCLOSURE/DISCLAIMER 
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.

The research set out in this report is based on information obtained from sources believed to be reliable, but PTVSI do not make any representation or warranty as to its accuracy, completeness or correctness. The information in this report is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. Any information, valuations, opinions, estimates, forecasts, ratings or targets herein constitutes a judgment as of the date of this report is published, and there is no assurance that future results or events will be consistent.


This report is not to be construed as an offer or a solicitation of an offer to buy or sell any securities or financial products. PTVSI and its associates, its directors, and/or its employees may from time to time have interests in the securities mentioned in this report or it may or will engage in any securities transaction or other capital market services for the company (companies) mentioned herein.

ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.


RESTRICTIONS ON DISTRIBUTION

By accepting this report, the recipient hereof represents and warrants that you are entitled to receive such report in accordance with the restrictions and agrees to be bound by the limitations contained herein. Neither this report nor any copy hereof may be distributed except in compliance with applicable Indonesian capital market laws and regulations. 

Rating Table

Rating
Remains
Buy
Target price
Remains
IDR 2,600
Closing price
5 February 2025
IDR 2,270
Implied upside+14.5%
Market Cap (USD mn)1,830.6
ADT (USD mn)3.0

Relative performance chart


Source: LSEG, Verdhana
M cap (USDmn)
1,830.6
Free float (%)
33.8
3-mth ADT (USDmn)
3.0
(%)
1M
3M
12M
Absolute (IDR)
1.8
1.8
0.0
Absolute (USD)
1.2
-1.6
-3.6
Rel to Jakarta Stock Exchange Composite Index
3.8
8.0
2.4

Research Analysts

Erwin Wijaya (erwin.wijaya@verdhana.id)

Tags: Telecoms, EXCL, EXCL JK, EXCL IJ, Erwin Wijaya
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