INCO
Contact our analyst Revita
9% upside, Hold
28th April 2023
Price Rp 6950
Target price Rp7585
28th April 2023
Price Rp 6950
Target price Rp7585
1Q23 production grew double digits
INCO has announced production of nickel in matte during 1Q23 of 16,769 metric tons, up 21% YoY compared to 1Q22’s 13,827 metric tons on the back of successful completion of the furnace 4 rebuild ;last year. Production also increased 10.3% compared to 1Q21’s 15,198 metric tons. The average selling price in 1Q23 was 18% higher than last quarter or 24% YoY compared to 1Q22. The 1Q23 sales revenue increased 54% YoY while cost of revenue increased 60% YoY. In addition, the cost of revenue fell 9% QoQ due to lower commodity prices, disciplined cost management and continuous productivity improvements. We adjust our forecasts for revenue 2023-2024F to USD 1,259 million and USD 1,311 million respectively or a CAGR increase of 5% during those 2 years, compared to 2022FY, due to forecast higher production volume and despite volatility in commodity prices.
Maintaining costs
Based on 1Q23 production, INCO continues to maintain its focus on improving productivity and cost efficiency to sustain competitiveness in the long term. This is despite higher cost of revenues in 1Q23, from energy expenses and royalties,, up 125% YoY and 76% YoY respectively. As of 1Q23, INCO booked EBITDA of USD 173.58 million, 49% higher than EBITDA in 1Q22 of USD116.2 million. Following the ground-breaking of the Morowali project in February 2023, works are ongoing in both mining and at the processing plant location. We maintain our forecast for cast/ton to decline by -13.70% YoY in 2023 to USD10,077/ton.
Valuation: 9% upside
We maintain our target price within one year at IDR 7,585 due to lower nickel price but with a higher production volume estimation in 2023. With only 9% upside, our recommendation is maintained as HOLD.
INCO has announced production of nickel in matte during 1Q23 of 16,769 metric tons, up 21% YoY compared to 1Q22’s 13,827 metric tons on the back of successful completion of the furnace 4 rebuild ;last year. Production also increased 10.3% compared to 1Q21’s 15,198 metric tons. The average selling price in 1Q23 was 18% higher than last quarter or 24% YoY compared to 1Q22. The 1Q23 sales revenue increased 54% YoY while cost of revenue increased 60% YoY. In addition, the cost of revenue fell 9% QoQ due to lower commodity prices, disciplined cost management and continuous productivity improvements. We adjust our forecasts for revenue 2023-2024F to USD 1,259 million and USD 1,311 million respectively or a CAGR increase of 5% during those 2 years, compared to 2022FY, due to forecast higher production volume and despite volatility in commodity prices.
Maintaining costs
Based on 1Q23 production, INCO continues to maintain its focus on improving productivity and cost efficiency to sustain competitiveness in the long term. This is despite higher cost of revenues in 1Q23, from energy expenses and royalties,, up 125% YoY and 76% YoY respectively. As of 1Q23, INCO booked EBITDA of USD 173.58 million, 49% higher than EBITDA in 1Q22 of USD116.2 million. Following the ground-breaking of the Morowali project in February 2023, works are ongoing in both mining and at the processing plant location. We maintain our forecast for cast/ton to decline by -13.70% YoY in 2023 to USD10,077/ton.
Valuation: 9% upside
We maintain our target price within one year at IDR 7,585 due to lower nickel price but with a higher production volume estimation in 2023. With only 9% upside, our recommendation is maintained as HOLD.
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