INCO
Contact our analyst Revita
1% upside, Hold
17th May 2022
Price Rp 7275
Target price Rp7375
17th May 2022
Price Rp 7275
Target price Rp7375
Strong profit in 1Q22
Despite a lower production volume target of 65,000 MT of nickel in matte for 2022, INCO was able to book a strong net profit of USD 67.6 million or 58% higher than 1Q21. The increase in 2022’s profit was mainly driven by a higher nickel price, which offset lower production due to maintenance (a rebuild of electric furnace no. 4 which was delayed from 2021). INCO recorded revenue of USD 235,1 million in 1Q22 or 12% lower YoY. The average realized price for nickel in matte was USD 17,432/ton, a 13% increase from 4Q21’s price of USD 15,372/ton. INCO’s cost of revenue fell by 29% yoy from the lower production volume in 1Q22. We expect 2022F average prices will remain volatile in the near-term due to the increased risk of tight nickel supply after Russia’s invasion of Ukraine. We have adjusted our revenue forecasts for 2022-2023 F to USD 1,019 million and USD 1110 USD 1,019 million respectively.
Progress on expansion
The Pomalaa projects has a new agreement after INCO together with Zhejiang Huayou Cobalt Company Ltd (Huayou) signed a Framework Cooperation Agreement (FCA) for developing a High-Pressure Acid Leaching (HPAL) processing facility in Pomala, Southeast Sulawesi. Huayou will construct and manage the Pomala HPAL project, and PT Vale will have the right to acquire 30% of the shares.
Valuation: 1% upside
We have a target price within one year of IDR 7,375 due to the rising nickel price and despite lower production volume. With 1% upside, our recommendation is HOLD.
Despite a lower production volume target of 65,000 MT of nickel in matte for 2022, INCO was able to book a strong net profit of USD 67.6 million or 58% higher than 1Q21. The increase in 2022’s profit was mainly driven by a higher nickel price, which offset lower production due to maintenance (a rebuild of electric furnace no. 4 which was delayed from 2021). INCO recorded revenue of USD 235,1 million in 1Q22 or 12% lower YoY. The average realized price for nickel in matte was USD 17,432/ton, a 13% increase from 4Q21’s price of USD 15,372/ton. INCO’s cost of revenue fell by 29% yoy from the lower production volume in 1Q22. We expect 2022F average prices will remain volatile in the near-term due to the increased risk of tight nickel supply after Russia’s invasion of Ukraine. We have adjusted our revenue forecasts for 2022-2023 F to USD 1,019 million and USD 1110 USD 1,019 million respectively.
Progress on expansion
The Pomalaa projects has a new agreement after INCO together with Zhejiang Huayou Cobalt Company Ltd (Huayou) signed a Framework Cooperation Agreement (FCA) for developing a High-Pressure Acid Leaching (HPAL) processing facility in Pomala, Southeast Sulawesi. Huayou will construct and manage the Pomala HPAL project, and PT Vale will have the right to acquire 30% of the shares.
Valuation: 1% upside
We have a target price within one year of IDR 7,375 due to the rising nickel price and despite lower production volume. With 1% upside, our recommendation is HOLD.
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