Telekomunikasi Indonesia Persero (TLKM IJ) (Buy) - Soft FY25 results

Soft FY25 results

TLKM has released its FY25 results, with headline profit reaching at IDR17.8tn (slightly below our FY25 projection of IDR18.4tn) – down 21% y-y. In 2025, the company changed its accounting policies that resulted in restatements of FY23-24 financials. Key accounting policy changes are as follows:

Drop cable (“last mile to customers”) reclassified as separate asset component (from previously lumped under access network) to better reflect customer-specific nature.
As such, drop cable useful asset life has changed from 25 to 5-10 years, aligned with usage and economic benefits.
To be applied retrospectively with restatement of 2023-2024 financials.
Consequently, there are adjustments to retained earnings (pre-2023). However, these changes do not have any impact on cash flow nor dividends.

However, this accounting policy change would have impact on future depreciation charges for at least the next 5 (five) years. The estimate for the increase (decrease) in depreciation charges for 2026-2030 is as follows

Drop cable IDR880bn / IDR419bn / IDR55bn / (IDR298bn) / (IDR642bn).
Other assets IDR1,446bn / IDR653bn / IDR228bn / (IDR96bn) / (IDR381bn).

As shown above, the accounting change will reduce depreciation expense in the 2029-30 periods.

We anticipate that despite this accounting policy change, TLKM’s future dividend payout ratio could reach over 100% given that the impacts from this accounting change are non-cash in nature. At present, the company’s consolidated net debt-to-EBITDA ratio stood at 0.55x – suggesting room for elevated dividend per share, which would provide some downside cushion on the share price. Meanwhile, on the back of continued market repair efforts, we see potential upward trends in the company’s future operating results.

Refer to below for details on TLKM’s FY25 results (and comparison for restated FY23-24 financials).

Valuation and risks

Our TP of IDR4,500 is based on DCF methodology, in which we assume a risk-free rate of 6.0%, an equity risk premium of 5.1% and a terminal growth rate of 1.5%. At our TP, the stock would trade at 6.8x 2025F EV/EBITDA (compared to 4.9x at the current price). Risks are adverse macroeconomics, lower data traffic growth, irrational competition, lower ARPUs, declining cellular revenue market share from outside Java and difficulties in getting new sites for network expansion.

Fig. 1: TLKM old and restated numbers

TLKM Y-Y Results IDRbn	FY23	FY23*	FY24	FY24*	FY25	Y-Y	2025F	vs FY25F
Gross Op. revenue	149,216	149,216	149,967	149,967	146,742	(2.2)	148,786	98.6
Indihome	28,785	28,785	26,262	26,262	26,119	(0.5)

Op Inc	44,916	43,220	42,386	40,848	34,591	(15.3)	36,531	94.7
Op margin	30.1%	29.0%	28.3%	27.2%	23.6%		24.6%
EBITDA	77,579	77,579	75,029	75,029	72,240	(3.7)	70,938	101.8
Margin	52.0%	52.0%	50.0%	50.0%	49.2%		47.7%
Net Profit	24,560	22,864	23,649	22,403	17,814	(20.5)	18,377	96.9
Margin	16.5%	15.3%	15.8%	14.9%	12.1%		12.4%
TLKM Y-Y B/S	FY23	FY23*	FY24	FY24*	FY25
Net fixed assets	180,755	172,063	180,566	170,335	165,453
Shareholders equity	135,744	128,704	142,094	133,808	130,685
* - Restated Numbers

Source: Company data, Verdhana research

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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