INCO
Contact our analyst Revita
7,5% upside hold
10th August 2020
Price Rp3640
Target price Rp3915
10th August 2020
Price Rp3640
Target price Rp3915
Maintaining production
As of 2Q20, production of nickel in matte and nickel in matte deliveries increased +6% and +19% QoQ while the average nickel price declined 11%, from US$/t 10428 to US$/t 9300. Based on the 2Q20 result, we maintain our production and nickel in matte deliveries target at 71,000 MT. As we said previously, INCO will revamp furnace no. 4 later in 4Q20 for 5 months. In terms of earnings, INCO managed to book 2Q20 bottom line of US$ 24 million, lower than US$ 29 million in 1Q20 but better than 2Q19 which was a loss of US$ 6,02 million. This year INCO will continue to work on cost efficiency. We maintain our revenue forecast for 2020F and 2021F at US$794 mn and US$854 mn and adjust the bottom line to US$ 86 million and US$ 91 million respectively.
Progress on divestment
On June 19, 2020, INCO along with Vale Canada Limited (VCL) and Sumitomo Metal Mining Co. Ltd. (SMM) signed a definitive agreement for the sale of a 20% stake in PT Vale Indonesia to PT Indonesia Asahan Alumunium (Persero) or Inalum in compliance with PT Vales’s divestment obligation under the Contract of Work (COW) dated January 15,1996 with the Government of Indonesia (as amended). Based on the COW, divestment is one of the requirements for PT Vales’s continuity of operations beyond 2025.
Valuation: 7,5% upside
Based on USD convertion, our TP within one year is Rp3915 higher than previously, or trading at 45x PER. With only 7,5% upside, our recommendation is HOLD.
As of 2Q20, production of nickel in matte and nickel in matte deliveries increased +6% and +19% QoQ while the average nickel price declined 11%, from US$/t 10428 to US$/t 9300. Based on the 2Q20 result, we maintain our production and nickel in matte deliveries target at 71,000 MT. As we said previously, INCO will revamp furnace no. 4 later in 4Q20 for 5 months. In terms of earnings, INCO managed to book 2Q20 bottom line of US$ 24 million, lower than US$ 29 million in 1Q20 but better than 2Q19 which was a loss of US$ 6,02 million. This year INCO will continue to work on cost efficiency. We maintain our revenue forecast for 2020F and 2021F at US$794 mn and US$854 mn and adjust the bottom line to US$ 86 million and US$ 91 million respectively.
Progress on divestment
On June 19, 2020, INCO along with Vale Canada Limited (VCL) and Sumitomo Metal Mining Co. Ltd. (SMM) signed a definitive agreement for the sale of a 20% stake in PT Vale Indonesia to PT Indonesia Asahan Alumunium (Persero) or Inalum in compliance with PT Vales’s divestment obligation under the Contract of Work (COW) dated January 15,1996 with the Government of Indonesia (as amended). Based on the COW, divestment is one of the requirements for PT Vales’s continuity of operations beyond 2025.
Valuation: 7,5% upside
Based on USD convertion, our TP within one year is Rp3915 higher than previously, or trading at 45x PER. With only 7,5% upside, our recommendation is HOLD.
Previously
