INCO
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30% upside, Buy
31st October 2023
Price Rp 5050
Target price Rp6560
31st October 2023
Price Rp 5050
Target price Rp6560
Production grew steadily in 3Q23
INCO recorded nickel in matte production growth of +2.5% YoY (17,513 MT) or +7.1% QoQ (2Q23: 16,769 MT) to 17,953 MT. Despite a decrease in the average realized price of -6% YoY during 9M23 or -8.20% QoQ in 3Q23, INCO's revenue still rose by double digits, +27% YoY to USD 937 million compared to USD 874 million in 9M22. This was supported by an increase in the volume of deliveries of nickel in matte. In 9M23, nickel in matte production grew by +18% YoY to 51,644 MT compared to 43,907 in 9M22. Sales volume of nickel in matte as of 9M23 also increased by +14% YoY to 50,435 MT compared to 44,347 MT in 9M22. We remain targeting a total nickel in matte production in 2023F of 70,000 MT, aligning with INCO's annual production target for this year. We estimate nickel in matte production will grow by a CAGR of 9.5% during 2023-2024 compared to production in 2022FY.
Maintaining lower costs
To sustain competitiveness, INCO remains focused on improving productivity and cost efficiency. According to our calculations, the cost of revenues in 3Q23 was lower than in 2Q23, helped by lower fuel consumption and royalty expenses. Despite a higher +6% cost of revenues during 9M23, as of 3Q23, cash costs per ton were at USD 9,340.6 per ton compared to USD 12,569.7 per ton in 3Q22. The forecasted cost per ton is expected to decline by -16.97% YoY in 2023 to USD 11,794 per ton, or a decrease in CAGR within 2023-2024F of –9% compared to 2022FY.
Valuation: 30% upside
Based on 9M23 results, we adjust our target price within a year to IDR 6,560. With a 30% potential upside, our recommendation is BUY
.
INCO recorded nickel in matte production growth of +2.5% YoY (17,513 MT) or +7.1% QoQ (2Q23: 16,769 MT) to 17,953 MT. Despite a decrease in the average realized price of -6% YoY during 9M23 or -8.20% QoQ in 3Q23, INCO's revenue still rose by double digits, +27% YoY to USD 937 million compared to USD 874 million in 9M22. This was supported by an increase in the volume of deliveries of nickel in matte. In 9M23, nickel in matte production grew by +18% YoY to 51,644 MT compared to 43,907 in 9M22. Sales volume of nickel in matte as of 9M23 also increased by +14% YoY to 50,435 MT compared to 44,347 MT in 9M22. We remain targeting a total nickel in matte production in 2023F of 70,000 MT, aligning with INCO's annual production target for this year. We estimate nickel in matte production will grow by a CAGR of 9.5% during 2023-2024 compared to production in 2022FY.
Maintaining lower costs
To sustain competitiveness, INCO remains focused on improving productivity and cost efficiency. According to our calculations, the cost of revenues in 3Q23 was lower than in 2Q23, helped by lower fuel consumption and royalty expenses. Despite a higher +6% cost of revenues during 9M23, as of 3Q23, cash costs per ton were at USD 9,340.6 per ton compared to USD 12,569.7 per ton in 3Q22. The forecasted cost per ton is expected to decline by -16.97% YoY in 2023 to USD 11,794 per ton, or a decrease in CAGR within 2023-2024F of –9% compared to 2022FY.
Valuation: 30% upside
Based on 9M23 results, we adjust our target price within a year to IDR 6,560. With a 30% potential upside, our recommendation is BUY
.
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