XLSmart Telecom Sejahtera (EXCL IJ)

2Q26 Earnings: In-line; Muted ARPU As Growth Led by Non-Data; 5G Build-Out Continues

• Inline 2Q26: strong revenue growth but led by enterprise segment amid weaker data yield; softer ARPU drove flat EBITDA margin.
• Merger costs rolling off (acc. depreciation cut to Rp4.5-5tr; integration cost Rp300bn) lift our FY26F EPS est. by +32%.
• Maintain Buy rating on FY27 turnaround prospect supported by 5G monetization edge; cut TP to Rp3,600 on higher capex guidance.

ARPU slightly declined to Rp46.9k; growth was more on non-data

EXCL booked robust revenue growth of +3.3% qoq in 2Q26, but the growth was driven more by enterprise projects rather than data revenue, which declined -1.9% qoq. This led to a relatively muted ARPU which declined -0.8% qoq to Rp46.9k, largely driven by softer yield. Management attributed this to change in portfolio mix, while traffic still grew robustly at +5.2% qoq. On the back of this, EBITDA margin only improved +20bps qoq to 45.9%, driving 1H26 EBITDA to Rp10.9tr (inline at 48/51% of our/ cons. FY26F). We maintain our FY26-28F revenue growth projection of +11.6%/ +5.0%/ +4.8% yoy. We see the execution of monetization in aggressive 5G deployment as a key support for the long term, backed by 23% 5G coverage and 27% 5G traffic contribution.

Merger-related cost was largely behind us

EXCL lowered its accelerated depreciation guidance for FY26F from Rp5-6tr to Rp4.5-5tr, with Rp3.7tr already absorbed in 1H26 and the remainder mostly to be booked in 3Q26, with some spillage into 4Q26. Integration cost is guided at only Rp300bn this year (Rp79bn in 1H26), as 90% of the network has already been integrated, while synergies remain on track at US$250–300mn, with US$153mn achieved in 1H26. On spectrum, the annual payment is Rp450bn in FY26F stepping up to Rp990bn p.a. going forward, partly offset by an estimated Rp1.1tr saving from the 900MHz return. We lift our FY26F net profit forecast by +32% to -Rp1.3tr largely on lower depreciation exp (from Rp6tr to Rp5tr), while keeping our EBITDA forecast largely unchanged.

Maintain Buy rating with lower TP; Capex guidance raised to Rp20tr

EXCL raised its FY26F capex guidance to Rp20tr from Rp15tr on the back of the spectrum acquisition and accelerated network deployment, which drives our FY26F FCF forecast to -Rp3.5tr. Accordingly, we cut our DCF-based TP to Rp3,600 (implying 5.5x FY26F EV/EBITDA). We keep our 3M tactical OW as merger-related costs continue to taper, setting up a turnaround in FY27F. Our price tracker and Opensignal observations point to EXCL leading on 5G implementation and best positioned among peers to monetize its 5G premium. Key risk is absence of incremental uplift from 5G monetization, given front-loaded and sizeable investment.

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