Jakarta. State-owned telecommunications firm Telkom Indonesia (TLKM) reported a net profit of Rp 5.7 trillion for Q2 2024, reflecting a 10 percent year-on-year (YoY) decline and a 6 percent quarter-on-quarter (QoQ) decrease. This brought the company's net profit for the first half of 2024 down by 8 percent YoY to Rp 11.8 trillion, missing the 2024 estimations.

“The operational performance is weak, with operating profit in Q2 2024 dropping 8 percent YoY and 8 percent QoQ. This resulted in a 3 percent YoY decrease in operating profit for the first half of 2024, falling short of expectations at 46 percent of the 2024 consensus estimate,” said Theodorus Melvin, Investment Analyst at Stockbit Sekuritas, in his report on Tuesday.

Despite a 4 percent YoY increase in the number of customers and a 0.1 percent QoQ rise, TLKM saw a significant drop in average revenue per user (ARPU) in the mobile segment, down 9 percent YoY and 1 percent QoQ to Rp 45,000.

“This decline in ARPU is the main factor behind TLKM’s performance drop. TLKM is scheduled to hold an earnings call on Tuesday, where we expect to get more details on the ARPU drop for Q2 2024 and the current market outlook,” Melvin added.

As of early trading on Tuesday, TLKM’s stock price fell by 4.2 percent to Rp 2,920, with trading fluctuating between Rp 2,920 and Rp 3,000 on the Indonesia Stock Exchange (IDX).

BRI Danareksa Sekuritas has maintained an overweight (OW) rating for the telecommunications sector. Indosat (ISAT) is highlighted as the top pick, with the potential for the highest net profit increase in Q2 2024. The recommendation for ISAT stock is a buy, with a target price of Rp 13,300.

ISAT plans to expand into technology sectors such as information, communication, and technology (ICT) and artificial intelligence (AI), allocating Rp 2.3 trillion for this expansion this year.

The second recommendation is for XL Axiata (EXCL), considering potential corporate actions such as a merger with Smartfren Telecom (FREN). BRI Danareksa Sekuritas advises buying EXCL stock with a target price of Rp 3,300.

For Telkom Indonesia, BRI Danareksa Sekuritas maintains a buy recommendation with a target price of Rp 4,400, based on its superior coverage and investments in optical fiber.