INCO
Contact our analyst Revita
Executing on costs, 14% upside
10th November 2017
Price Rp3,120
Target price Rp3,550
10th November 2017
Price Rp3,120
Target price Rp3,550
Lower production target
Executing on cost competitiveness
Higher TP: 14% upside, but HOLD
- We lower nickel production target to 78,000 MT, in line with INCO’s forecast, which is close to 2016FY production of 77,581 MT.
- Despite lower volume, average price is increasing in line with rising global nickel prices.
- This trend can be seen in 9M17, where 9M17 volume of nickel in matte production declined 0.87% to 57494 MT, 74% of the annual target. Average price jumped 9.82% to 7,773 US$/MT.
- We have adjusted our revenue forecast in 2017 – 2018F to USD. 667,1 mn & USD. 735.99 mn respectively.
Executing on cost competitiveness
- INCO is on track to continue improving efficiency and reduce costs.
- In 3Q17, cost of revenue per ton declined 13% to 7,255 USD/MT compared to 2Q17, driven primarily by a recovery in provisions for a decline in inventory value.
- EBITDA in 3Q17 was US$34.1mn higher than US$. 10.9 mn in 2Q17 due to higher sales volume.
- We adjust our bottom line target in line with the 9M17 result which showed an improving trend. in 2Q17 the company’s net loss was WUS$.(15,32mn)), but INCO managed to book a net profit in 3Q17 of US$. 1,85mn.
Higher TP: 14% upside, but HOLD
- With the improvement in cost per ton in 3Q17 despite lower production volume and the stable nickel price, we adjust our target price higher .
- With WACC of 11.45%, we have a one year TP of 3550 / share higher than our
- previous target of 3345/shares.
- With only 14% upside compared to the last closing price, our recommendation is HOLD.
