ISAT’s 1H25 results came in below our projections. Following the results, the company lowered its EBITDA growth guidance for FY25E to low single-digits (from over 10% y-y). This is, in part, due to slow top-line growth which we believe can be attributed to: 1) ongoing market repair efforts (related to reduction in sales of Starter Packages (SPs), 2) soft purchasing power (which complicates efforts to raise prices of renewal services), 3) customer hyper-personalization packages will take time to be implemented (i.e., gradual), and 4) still substantial product variations (SKUs) despite simplification efforts. Whilst we think pre-paid ARPUs may improve in 3Q25F, we think the market repair process is still fragile given the soft purchasing power which may limit operators’ abilities to raise package prices for price-sensitive users. Meanwhile, the plan for fiber sales remains. The company has received two offers and expects to close the transaction by end-3Q25. We estimate the asset sale to yield an EV of USD800-1,000mn.

2Q25 results summary

● Headline revenue reached IDR13.5tn (flat q-q, -4% y-y), bringing 1H25 revenue to IDR27.1tn (-3% y-y). Mobile services registered 2Q25 revenue of IDR11.3tn (-1% q-q, -5% y-y) due to market repair efforts which resulted in lower revenue initially.

● EBITDA came in at IDR6.4tn (flat q-q, -7% y-y), bringing 1H25 EBITDA to IDR12.9tn (-4% y-y). This brings 1H25 EBITDA margin to 47.4% - down 50bp y-y. Whilst headline 1H25 EBITDA is below our projection, headline margin is better than our estimate of 45.0%.

● Net profit was IDR1.0tn (-22% q-q, -29% y-y) primarily reflecting lower revenue on a y-y basis. However, on a q-q basis, they appear to have stabilized. We think that if market repair momentum persists, topline and margin improvements would largely become more visible in 2026F. These should act as long-term positive catalysts for the stock.

Valuation and risks

Our TP of IDR3,600 is based on DCF valuation. Key parameters are: a risk-free rate of 6.2%, an equity risk premium of 7.4%, beta of 1.2x and a terminal growth rate of 2.5%. At our TP, the stock would trade at 5.6x FY25F EV/EBITDA (compared with the current price implied multiple of 3.5x). Key risks include adverse macroeconomic trends that could impact purchasing power, lower price increases or subscriber base, higher opex due to slower post-merger network integration, and/or irrational competition leading to price cuts.

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. 

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Erwin Wijaya (erwin.wijaya@verdhana.id)