Company Update / Metals / IJ / Click here for full PDF version
Author(s): Ryan Winipta ;Reggie Parengkuan
- reported Rp1tr in 1Q24 (-13% qoq/-27% yoy), below ours and consensus FY24F forecast (15% IPS/consensus).
- Lower NP qoq was primarily driven by lower FeNi price on qoq basis (-6% qoq) leading to lower FeNi margin in 1Q24.
- We maintain our Buy rating and left our TP unchanged for now as we await for more details on earnings call (2ndof May).
1Q24 review: below consensus on lower FeNi margin
reported 1Q24's NP of Rp1tr(-13% qoq/-27% yoy)which was below ours and consensus forecast (15% IPS/consensus) presumably driven by lower NPI/FeNi prices in 1Q24 (-6% qoq) which was partly cushioned by higher associate income, primarily from HPL (45%-owned HPAL plant) of Rp277bn (+37% qoq) as we expect HPL has been able to benefit from higher MHP/NiSO4 price (YTD +17%/+27%) vs. 4Q23. Opex remained flattish qoq with no extraordinary items below operating line (Fig. 1).
Expect better 2Q24F on better NPI/MHP prices
We think the overall result is somewhat expected given the soft prices environment in 1Q24, particularly on the significant decline in FeNi prices. As such, we expect to deliver better NP in 2Q24F onwards, owing to higher NPI and MHP prices in 2Q24F-to-date by +9% and +14% on qoq basis, respectively (Fig. 3) albeit this might be partly offset by higher ore prices (Fig. 4) and higher cash costs for NPI/FeNi operation as LME nickel price rallied to US$19k/t as of latest (from US$15k/t); note that benchmark price (HPM) is linked to LME and only c.70% nickel-ore is sourced internally.
Is consensus earnings downgrade imminent?
With 1Q24 earnings significantly below ours/consensus expectation, we think there could be at least c.10% earnings downgrade in FY24F earnings, especially if we take into account YTD soft NPI prices of US$11.7k/t vs. our FeNi price forecast of US$12.5k/t in FY24F. However, we have observed that slight recovery in stainless-steel demand (1Q demand: +8% yoy) has been able to positively affect NPI/FeNi prices, now at an uptrend and trading at US$12k/t as of latest. Thus, we maintain our NPI/FeNi price forecast of US$12.5k/t in FY24F.
Maintain Buy with an unchanged SOTP -based TP of Rp1,100
We maintain our forecast and left our TP unchanged for now as we await more details from earnings call on 2ndof May with operational data also yet to be disclosed. is currently trading at 7.5x FY24F. Risks are weaker NPI/FeNi price and project delays.
Sumber : IPS
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