XLSmart Telecom Sejahtera (EXCL IJ)

Post-Merger Scale Rebuilding in Progress

• XL’s National Roaming is 100% activated with MOCN to follow, offering Smartfren potential ARPU upside from improved coverage and service.
• We expect add’l Rp1tr integration cost in 2H25 before more synergies materialize in FY26 and assumed Rp15-16tr capex in FY25-26.
• We maintain Buy rating and raised TP to Rp3,310 (5.2x EV/EBITDA, +0.8 SD) as we roll forward valuation to FY26F, reflecting growth resumption.

Merger process progressing well; unlocking Smartfren’s ARPU potential

Post merger, XL’s national roaming is already 100% activated, giving Smartfren subscribers access to 156 additional cities. The integration process is targeted for completion within eight quarters, with MOCN deployment to follow, which should enable a larger spectrum portfolio and wider coverage post-merger. We see this as a structural catalyst for Smartfren’s ARPU uplift (4Q24: Rp24k/month), driven by improved coverage and service quality. That said, we expect EXCL to maintain commercial QoS differentiation to mitigate cannibalization risk and preserve brand segmentation.

FY25 earnings pressured but expect clearer synergies impact in FY26 onward

In 2Q25, EXCL booked Rp486bn in integration costs, with mgmt. guiding for an additional Rp1tr in 2H25, alongside US$100-200mn in cost synergies for this year. We expect meaningful cost savings synergy to begin in 2H25 and accelerate into FY26F, largely from the planned dismantling of 9-10k overlapping sites. We forecast reported EBITDA margins at 43.4%/45.8% in FY25F/26F, as we expect elevated cash opex to weigh near term before larger synergies materialize. Management guided FY25 capex of Rp20-25tr, with around half likely to be spent in FY25 and the remainder carried into FY26F, reflecting sequenced deployments and cash flow phasing. The capex will be allocated to integration and modernization, with spending supported by softer vendor financing terms.

Maintain Buy, raise TP to Rp3,310 on growth resumption post-cleansing

We now forecast FY25 revenue growth of +24.7% yoy, in line with guidance of 20-30% yoy (baseline from EXCL standalone FY24), and +12.4% yoy in FY26F, supported by Smartfren’s ARPU uplift. However, we forecast FY25 earnings to remain negative, weighed by integration costs, accelerated depreciation, and higher cash opex despite initial synergy realization, before projecting FY26F reported net profit of Rp531bn. We maintain our Buy rating with a higher TP of Rp3,310 (based on 5.2x EV/EBITDA, +0.8 SD above 5-yr mean), reflecting long-term growth potential post-integration and clearer price repair efforts as network consolidation progresses. Our valuation rolls forward to FY26F, based on DCF and mean EV/EBITDA multiples. EXCL currently trades at 5.0x FY26F EV/EBITDA (+0.3 SD vs. 5-yr mean).

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