Comprehensive Analysis of Indosat (ISAT IJ): Performance, Risks, and Opportunities
Broker Name: UOB Kay Hian
Date of Report: Wednesday, 12 February 2025
Indosat (ISAT IJ): A Deep Dive Into Indonesia’s Second-Largest Telco Operator
Indosat (ISAT IJ), the second-largest telecommunications operator in Indonesia with a subscriber base nearing 100 million, has been a key player in the regional telco landscape. The company operates within the Communication Services sector and boasts a market capitalization of Rp52,407.6 billion (US\$3,198.7 million). Despite recent challenges, the company’s performance highlights its resilience and potential for growth in a competitive market.
Stock Overview
- Share Price: Rp1,625
- Target Price: Rp2,100 (revised from Rp3,100)
- Upside Potential: 29.2%
- Major Shareholders: Ooredoo Hutchison Asia Pte. Ltd. (65.6%), Perusahaan Pengelola Aset (9.6%)
- 52-Week High/Low: Rp3,063/Rp1,580
Financial Performance: 4Q24 and FY24 Results
Indosat reported its FY24 results with an EBITDA of Rp26 trillion, which aligns with both internal and consensus expectations. However, its net profit after tax (NPAT) for FY24 was slightly lower than consensus at Rp4.9 trillion. The company’s 4Q24 EBITDA fell 2% year-on-year (yoy), largely due to increased seasonal marketing expenses and reduced margins in its business-to-business (B2B) segment. This decrease in EBITDA margin was compounded by a high base effect from a one-off gain in 4Q23, which saw a reported NPAT drop of 40% yoy.
Financial Highlights (Year to 31 December)
| Metrics |
4Q23 |
3Q24 |
4Q24 |
FY23 |
FY24 |
| Sales (Rp billion) |
13,767 |
13,836 |
14,075 |
51,229 |
55,887 |
| EBITDA (Rp billion) |
6,471 |
6,588 |
6,375 |
23,938 |
26,375 |
| Net Profit (Rp billion) |
1,719 |
1,143 |
1,033 |
4,506 |
4,911 |
Key Metrics and Trends
Indosat’s EBITDA margin for FY24 stood at 47.2%, showing a slight improvement over FY23. However, quarterly analysis revealed a drop to 45.3% in 4Q24 due to increased marketing and B2B costs. The company’s blended Average Revenue Per User (ARPU) rose 5% quarter-on-quarter (qoq), but remained largely flat year-on-year (yoy). Subscriber numbers decreased by 4% yoy to 94.7 million by the end of 4Q24.
Future Projections
Looking ahead, Indosat expects EBITDA to grow by 7% yoy in 2025. Its revenue projections for FY25 are set at Rp58,042 billion, while net profit is forecasted to reach Rp5,140 billion. The company anticipates further recovery and stabilization of margins, driven by higher ARPU and strategic initiatives in AI-related businesses.
Risks and Challenges
Despite its positive outlook, Indosat faces several risks, including intensifying competition from existing and new players, unfavorable macroeconomic conditions, regulatory changes, and slower-than-expected demand for AI-related services. These factors could potentially impact the company’s ability to achieve its financial targets.
Valuation and Recommendation
UOB Kay Hian maintains a BUY recommendation for Indosat, albeit with a revised target price of Rp2,100 (down from Rp3,100). The price adjustment reflects increased market competition and the realization of most synergies from its merger with Hutchison Tri in early 2022. At the revised target price, Indosat is valued at 3.6x 2025 EV/EBITDA, in line with its historical -0.75SD levels.
Conclusion
Indosat continues to showcase resilience in a competitive market. Its strategic initiatives and focus on operational efficiency provide a strong foundation for future growth. While risks remain, the company’s strong financials and positive outlook make it a compelling investment opportunity.
