Company Update / IJ / Click here for full PDF version
Author(s): Ryan Winipta ;Reggie Parengkuan
- has yet to obtained approval for three of its eight mining block (IUP), equivalent to c.5mn wmt production per annum vs. 20mn target.
- As a result, we lower our ore sales volume to 12mn wmt in FY24F (from 14mn) to take into account the delayed RKAB issue into our forecast.
- We still like 's earnings momentum starting 2Q24F; Maintain our Buy rating with lower TP of Rp1,750/share.
1Q24 takeaways: the worst is already over
We think the worst is already over for as the delayed RKAB issue has affected its operational performance in 1Q24 with limited nickel ore sales, 0 sales of FeNi and bauxite ore, in addition to low nickel-ore ASP (US$33/wmt) as a result of lower LME nickel price. Starting 2Q24F, we expect significant improvement in nickel-ore sales volume, better nickel ore ASP (Fig. 3), volume recovery in both FeNi and bauxite ore, in addition to relatively resilient gold-trading volume.
Key drivers are: gold volume, RKAB approval, and LME price
Few key factors to consider are: 1) the approval progress for 's three remaining mining blocks (IUP) - our check indicates c.35% of FY24F ore quota in Indonesia is yet to be approved, meaning this is not entirely a company-specific issue, 2) resiliency in gold-trading volume, with Apr-24 sales relatively comparable with 's run-rate in 1Q24F, and 3) further upside in LME nickel price as higher LME price would translated into higher nickel-ore ASP, albeit with a 1-2 month lag to benchmark price (HPM).
Lower our FY24F/25F NP forecast by 14%/3%
However, we think management guidance of achieving 18.8mn nickel-ore sales volume is no longer realistic given the uncertainty in RKAB approval in addition to soft 1Q24 achievement. As a result, we lower our nickel ore sales volume forecast to 12mn (from previously 14mn) and slightly lower our ore ASP and bauxite ore sales forecast (Fig. 2). Thus, our FY24F/25F NP forecast was lowered by 14%/3%, respectively.
Maintain Buy rating with a lower TP of Rp1,750/share
We maintain our Buy rating but lower our TP to Rp1,750/share (from Rp1,800/share) to take into account our lower NP forecast in FY24F/25F. Our TP is based on 1-year forward P/E multiple of 13x P/E (unchanged). We still like 's earnings momentum starting 2Q24F in addition to our preference for LME nickel (report), which we think has more upside than NPI/Sulphate. Downside risks include lower than expected nickel demand, and no progress on RKAB approval.
Sumber : IPS
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