Indosat (ISAT IJ) - Strong 1H26, Monetisation Phase Next
ISAT reported solid 2Q26 EBITDA of IDR7.4tr (+1.6% QoQ, +14.2% YoY), supported by tighter cost management across the board that lifted EBITDA margin to 47.7% (2Q25: 47.6%), slightly above ours/cons at 52.1%/51.1% (3Y avg: 52.4%). Core earnings rose to IDR1.6tr (+5.8% QoQ, +51.6% YoY), above ours/cons at 54.2%/49.1% (3Y avg: 46.8%). Reported net profit stood at IDR2.8tr (+88.9% QoQ, +175.1% YoY), boosted by a one off gain of IDR1.5tr from the FiberCo divestment.
ISAT reported solid 2Q26 EBITDA of IDR7.4tr (+1.6% QoQ, +14.2% YoY), supported by tighter cost management across the board that lifted EBITDA margin to 47.7% (2Q25: 47.6%), slightly above ours/cons at 52.1%/51.1% (3Y avg: 52.4%). Core earnings rose to IDR1.6tr (+5.8% QoQ, +51.6% YoY), above ours/cons at 54.2%/49.1% (3Y avg: 46.8%). Reported net profit stood at IDR2.8tr (+88.9% QoQ, +175.1% YoY), boosted by a one-off gain of IDR1.5tr from the FiberCo divestment.
2Q26 revenue came in line at IDR15.4tr (+1.4% QoQ, +14.0% YoY), driven by robust mobile revenue growth of +13.2% YoY alongside an accelerating GPU contribution of USD17mn that lifted MIDI revenue +19.4% YoY. Mobile ARPU set a new all-time high at IDR46.0k (+1.8% QoQ, +19.5% YoY), with data traffic at 5.0k PB (+1.6% QoQ, +15.2% YoY). Subscribers fell to 93.4mn (-2.1% YoY), but consumption per sub rose to 53.4GB/sub (+17.7% YoY) and data yield held broadly flat at IDR2.6/MB (-1.8% YoY).
Management frames 5G as a monetisation story rather than a speed race, prioritising network capacity and user-experience upgrades as the newly secured 700MHz and 2.6GHz bands become usable from August, with the network ready by October. HiFi Air 5G (FWA) is designed to capture the broadband opportunity that fresh capacity unlocks. Capex guidance was raised to IDR23tr (from IDR13tr), excluding NeoCloud, which carries USD1.2-1.5bn of contracted revenue over five years with a two-year extension option and all clusters live by October. FY26F revenue and EBITDA guidance was revised up to high-single-digit growth.
We maintain our BUY call with a revised TP of IDR2,700 (from IDR2,800), implying 4.8x FY27F EV/EBITDA. Following solid 1H26 results, we lift FY26F/27F revenue by +1.7%/+1.7% and EBITDA by +1.3%/+1.8%, while trimming our EBITDA margin assumption to 46.5%/47.2% to reflect the upfront spectrum payments. We also roll our valuation forward to FY27F and raise our risk-free rate to 7.5% (from 6.5%), lifting WACC to 12.1% (from 11.7%). Key risks: slower ARPU improvement, weaker subscriber growth, and AI/GPUaaS execution risk.
