INCO
Contact our analyst Revita
3% upside hold
18th November 2020
Price Rp4580
Target price Rp4700
18th November 2020
Price Rp4580
Target price Rp4700
Revised production target
As of 3Q20, production of nickel in matte and nickel in matte deliveries increased +10,41% and +11,26% YoY while the average realized nickel price increased by 1,34%, from US$/t 8864 to US$/t 10097. INCO revised its target for nickel production in 2020 from about 71,000 tons to 73,700 tons, or 4% yoy growth compared to 2019. This increase is due to a shift in the planned rebuild of electric furnace 4 which was originally scheduled for the 4Q20 to 2Q21. In terms of earnings, INCO managed to book 3Q20 bottom line and EBITDA of US$ 23,5 million and US$ 84,7 million respectively mostly driven by a higher average realized nickel price. INCO will continue to work on cost efficiency. We revise our revenue forecasts for 2020F and 2021F of US$824 mn and US$854 mn and adjust the bottom line to US$ 95 million and US$ 101 million respectively.
Progress on divestment
In Oct, 2020, INCO along with Vale Canada Limited (VCL) and Sumitomo Metal Mining Co. Ltd. (SMM) announced the closing of the sale of a 20% stake in PT Vale Indonesia to PT Indonesia Asahan Alumunium (Persero) or Inalum. The completion of this divestment means PT Vale is well positioned to continue to contribute to the development of Indonesia and reinforces PT Vale’s long-standing commitment to value-added processing of nickel resources, sustainability and local empowerment in the country.
Sorowako and other Projects Progress
For Sorowako. INCO will increase production capacity to 90,000 tons. Currently many other initiatives are also being reviewed, including the construction of 1-line production, de-bottlenecking, and increasing high cut-off grades to produce higher ore levels. 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: 3% upside
Based on adjustments after the 9M20 result, our TP within one year is IDR 4,700, higher than previously, or trading at 55x PER. With only 3% upside, our recommendation is HOLD.
As of 3Q20, production of nickel in matte and nickel in matte deliveries increased +10,41% and +11,26% YoY while the average realized nickel price increased by 1,34%, from US$/t 8864 to US$/t 10097. INCO revised its target for nickel production in 2020 from about 71,000 tons to 73,700 tons, or 4% yoy growth compared to 2019. This increase is due to a shift in the planned rebuild of electric furnace 4 which was originally scheduled for the 4Q20 to 2Q21. In terms of earnings, INCO managed to book 3Q20 bottom line and EBITDA of US$ 23,5 million and US$ 84,7 million respectively mostly driven by a higher average realized nickel price. INCO will continue to work on cost efficiency. We revise our revenue forecasts for 2020F and 2021F of US$824 mn and US$854 mn and adjust the bottom line to US$ 95 million and US$ 101 million respectively.
Progress on divestment
In Oct, 2020, INCO along with Vale Canada Limited (VCL) and Sumitomo Metal Mining Co. Ltd. (SMM) announced the closing of the sale of a 20% stake in PT Vale Indonesia to PT Indonesia Asahan Alumunium (Persero) or Inalum. The completion of this divestment means PT Vale is well positioned to continue to contribute to the development of Indonesia and reinforces PT Vale’s long-standing commitment to value-added processing of nickel resources, sustainability and local empowerment in the country.
Sorowako and other Projects Progress
For Sorowako. INCO will increase production capacity to 90,000 tons. Currently many other initiatives are also being reviewed, including the construction of 1-line production, de-bottlenecking, and increasing high cut-off grades to produce higher ore levels. 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: 3% upside
Based on adjustments after the 9M20 result, our TP within one year is IDR 4,700, higher than previously, or trading at 55x PER. With only 3% upside, our recommendation is HOLD.
Previously
