INCO
Contact our analyst Revita
6% Downside, Sell
12th March 2021
Price Rp4530
Target price Rp4270
12th March 2021
Price Rp4530
Target price Rp4270
Lower production target
In 2021, INCO targets a reduction in production due to a seven-month furnace rebuild from May through November, which was previously scheduled for the 4Q20. Based on 9M20 result, Nickel in matte production reached 55,792 tons, or 10,41 % yoy growth. We believe production of nickel in matte in 2021, will be below 70,000 tons in line with the 5-7 months production halt. In 2020, production of nickel in matte and nickel in matte deliveries increased +1,7% and +1,1% YoY while the average realized nickel price decreased by -3,93%, to US$/t 10498 from US$/t 10855 in 2019. In terms of earnings, INCO managed to book 2020 bottom line and EBITDA of US$ 82,8 million and US$ 273, million respectively, increases of 44% YoY and 18% YoY respectively. INCO will continue to exercise prudent control over its spending to preserve cash. INCO is also improving productivity and cost efficiency to sustain long term competitiveness We revise our revenue forecasts for 2021F to US$748 mn with an average nickel price between USD/tons 15,000 – 16,000 and lower sales volume because of lower production volume. We also adjust the bottom line to US$ 95 million in 2021F.
Bahodapi and Pomala Progress
This year, INCO continues to work on the realization of two new projects that are currently still in the feasibility study stage, and the licensing process. One is a ferronickel smelter in Bahodopi, Central Sulawesi and the other is a High Pressure Acid Leaching (HPAL) smelter in Pomala, Southeast Sulawesi. Bahodapi and Pomala are still in the process of completing the Final Investment Decision (FID) with both partners and an announcement is expected in 3Q21. Meanwhile, financing through loans will be at the JV company level.
Valuation -6% downside
Based on our adjustments, our TP within one year is IDR 4270. or trading at 52x PER. With -6% downside, our recommendation is SELL.
In 2021, INCO targets a reduction in production due to a seven-month furnace rebuild from May through November, which was previously scheduled for the 4Q20. Based on 9M20 result, Nickel in matte production reached 55,792 tons, or 10,41 % yoy growth. We believe production of nickel in matte in 2021, will be below 70,000 tons in line with the 5-7 months production halt. In 2020, production of nickel in matte and nickel in matte deliveries increased +1,7% and +1,1% YoY while the average realized nickel price decreased by -3,93%, to US$/t 10498 from US$/t 10855 in 2019. In terms of earnings, INCO managed to book 2020 bottom line and EBITDA of US$ 82,8 million and US$ 273, million respectively, increases of 44% YoY and 18% YoY respectively. INCO will continue to exercise prudent control over its spending to preserve cash. INCO is also improving productivity and cost efficiency to sustain long term competitiveness We revise our revenue forecasts for 2021F to US$748 mn with an average nickel price between USD/tons 15,000 – 16,000 and lower sales volume because of lower production volume. We also adjust the bottom line to US$ 95 million in 2021F.
Bahodapi and Pomala Progress
This year, INCO continues to work on the realization of two new projects that are currently still in the feasibility study stage, and the licensing process. One is a ferronickel smelter in Bahodopi, Central Sulawesi and the other is a High Pressure Acid Leaching (HPAL) smelter in Pomala, Southeast Sulawesi. Bahodapi and Pomala are still in the process of completing the Final Investment Decision (FID) with both partners and an announcement is expected in 3Q21. Meanwhile, financing through loans will be at the JV company level.
Valuation -6% downside
Based on our adjustments, our TP within one year is IDR 4270. or trading at 52x PER. With -6% downside, our recommendation is SELL.
Previously