Source: LSEG, Verdhana

Maintain Buy with revised TP of IDR1,900

Opportunity post MSCI exclusion backed by stronger fundamentals

ANTM recorded a strong earnings recovery in 2Q24, with profits surging 450% q-q and 479% y-y. Following the August rebalancing announcement, ANTM is set to be excluded from the main MSCI index, where it previously held a 0.5% weight, translating into an estimated outflow of USD50mn (equivalent to 15 days of ADTV). Despite this, we see a positive opportunity ahead, supported by strong fundamentals and attractive valuations, driven by: 1) a >60% increase in nickel ore sales in 2H (vs 1H) following permit (locally known as RKAB) approval, 2) higher nickel ore ASP following an HMA (Indonesia nickel index) price lagging (Fig. 1) with potential 5%-10% price premium due to a shortage caused by weather disruptions, and 3) gold margin improvement post the buyback spree in 1H24 (which affected 1H24 margins), aided by stronger sales toward the end of the year.

We revised our FY24F EBITDA/earnings forecasts by +13%/+23%

Post 2Q24 results, we have revised our FY24F EBITDA and earnings forecasts by +13% and +23%, respectively. This upward revision includes: 1) as increase in our nickel ore sales estimate to 12mt (from 11mt), 2) a recovery in the FeNi plant, 3) adjusting NPAT to incorporate forex gain in 2Q. ANTM managed to get a 23% reduction in FeNi cash costs (~USD11,900/ton for 2Q) due to lower energy costs and potential to offload 3kt of FeNi inventory in 3Q24F.

More inorganic growth story; maintain Buy with a higher TP of IDR1,900

ANTM is also pursuing inorganic growth opportunities, including the acquisition of a stake in Tsingshan's (unlisted) nickel processing business, exploring new resources through an IUP concession auction, and a potential agreement with PT Freeport Indonesia (unlisted) to offtake 20 tons of gold from its cathode smelter (Fig. 6). This move could improve the gold trading margin, potentially reducing reliance on imported gold.

We maintain our Buy rating with a higher TP of IDR1,900 (IDR1,700 earlier), derived from 9x FY25F EV/EBITDA, at -0.5 SD of its 5Y average, implying 15x FY25F P/E. We are yet to factored in its future projects in our valuation as we are waiting for more clarity. In the current tight market of nickel ore, we are more constructive on nickel ore producers including ANTM and MDKA IJ (Buy). Downside risks include a decline in the LME nickel price, regulatory changes, and setbacks to future projects.

Fig. 1: Nickel ore on the rise due to lagging HMA price formula

 

Fig. 2: ANTM’s revised FY24F operational target for L49R54

Commodity	Unit	2022	2023	YoY	2024F	YoY
Gold	Koz	1,124	840	-25%	1,134	35%
Ferronickel	Ktons	24.2	20.1	-17%	20.3	1%
Nickel ore	mn wmt	7.0	11.7	68%	12.1	3%
CGA Alumina	Ktons	144.0	146.2	2%	169.6	16%
Bauxite ore	Ktons	1.2	1.5	21%	1.1	-27%

 

Fig. 3: ANTM assumption changes

 

Fig. 4: ANTM EBITDA and net margin

Fig. 5: ANTM DER and ROE trend

 

Fig. 6: ANTM project details and new strategic inorganic moves

Project/Strategic Move	Capacity/Details	Expected Production/Outcome	Total Capex (USD)
RKEF Plant	88,000 tons of RKEF	Start construction 1Q25	1.4 billion
HPAL Project	55,000 tons of HPAL	~12 months behind RKEF	1.9 billion
Smelter-Grade Alumina Refinery	1 million tons Bauxite refining	1H25	800-900 million
Sign CSPA with Tsingshan	Stake in nickel processing business	Acquisition of stake	-
IUP Concession Auction	New resources and mine life (probably gold)	Addition of new resources	-
Domestic Gold Sourcing from Freeport's smelter	Offtake 20 tons of gold	Sourcing from Gresik smelter	-

 

Fig. 7: ANTM five-year EV/EBITDA band

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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