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Trimegah Bangun Persada NCKL IJ- Buy - 2Q24 results above our projections

Trimegah Bangun Persada NCKL IJ- Buy - 2Q24 results above our projections

Mining MW 658 6th Aug, 2024

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2Q24 results above our projections


Overall results were above our projections, with 2Q24 profit of IDR1.8tn (+80% q-q), bringing 1H24 profit to IDR2.8tn (+2% y-y). At the operating level, the company delivered 2Q24 EBITDA of IDR2.3tn (20% y-y), above our projection. On operations, RKEF production and sales increased (+8% and 2%, respectively), while cash margins improved on the back of slightly improved ASP and lower cash costs. Below the operating level, income from JV (its HPAL operation) rose by +29% q-q, with 1H24 comprising 55% of our full-year estimate.

NCKL 2Q24 results summary

    • 2Q24 revenue reached IDR6.8tn (+12% q-q, +24% y-y), bringing 1H24 revenue to IDR12.8tn (+25% y-y), in line with our forecast and the Bloomberg consensus estimate.
    • 2Q24 EBIT increased by +50% q-q to IDR1.9tn, bringing 1H24 EBIT to IDR3.1tn (+13% y-y), slightly ahead of our/consensus estimates.
    • 2Q24 NPAT reached IDR1.8tn (+80% q-q, 31% y-y), bringing 1H24 NPAT to IDR2.8tn (+2% y-y), above our forecast and in line with the consensus estimate.

    Valuation and risks

    We derive our TP of IDR1,260 based on DCF-based SOTP valuation with a 10% WACC. Our TP implies a FY24F P/E of 13.5x. Among nickel companies, we favor NCKL as one of the lowest cash cost producers, and we believe it deserves a premium valuation. Additionally, NCKL is one of the listed companies running HPAL operations, making the company well-positioned to capture growth from the increasing penetration of EVs. Risks include commodity price volatility, slowing EV demand, slower-than-expected commissioning of new projects, and limited current nickel mine life.

    Fig. 1: NCKL results recap

    NCKL 2Q24 result         FY24F/FY24F
    in IDR bn2Q231Q242Q24QoQ YoY 6M236M24YoY% Ve% cons
    Revenue5,4566,0346,77012%24%     10,242    12,80425%49%49%
    Gross Profit1,9321,6182,20536%14%       3,499      3,8229%53%48%
    EBIT1,5741,2441,86050%18%       2,747      3,10513%58%53%
    EBITDA1,9241,6672,30338%20%       3,301      3,97120%62%54%
    Net Income1,3771,0011,80580%31%       2,745      2,8062%60%51%
    JV income417277655137%57%          939         932-1%58% 
                
    GPM35.4%26.8%32.6%   34.2%29.9%   
    OPM28.9%20.6%27.5%   26.8%24.2%   
    EBITDA35.3%27.6%34.0%   32.2%31.0%   
    NPM25.2%16.6%26.7%   26.8%21.9%   
                
    NCKL operational2Q231Q242Q24QoQ YoY 6M236M24YoY% FY24F 
    FeNi-RKEF         
    FeNi production (Ktons-Ni)   23,393    30,434    32,9808%41%     37,550    63,41469%52% 
    FeNi sales (Ktons-Ni)   22,705    31,646    32,3532%42%     37,774    63,99969%53% 
    FeNi ASP (USD/ton)  13,908   11,208   11,2941%-19%    15,088   11,251-25%  
    FeNi CC (USD/ton)  10,616     8,692     8,371-4%-21%    11,240     8,532-24%  
    Cash margin (USD/ton)    3,292     2,516     2,92316%-11%      3,848     2,720-29%  
    MHP-HPAL           
    MHP production (Ktons-Ni)   15,438    16,716    21,61829%40%     30,002    38,33428%40% 
    MHP sales (Ktons-Ni)   11,270      7,899      8,5959%-24%     23,969    16,494-31%55% 
    MHP ASP (USD/ton)  15,725   11,691   14,50524%-8%    16,821   12,983-23%  
    MHP CC (USD/ton)    6,921     6,346     5,880-7%-15%      7,304     6,116-16%  
    Cash margin (USD/ton)    8,804     5,345     8,62561%-2%      9,517     6,867-28%  
    Ni Sulfate         
    Ni sulfate prod (Ktons-Ni)     2,797      9,664      9,8642%253%       2,797    19,528598%62% 
    Ni sulfate sales (Ktons-Ni)     1,290      7,765    11,21344%769%       1,290    18,9781371%60% 
    Ni-Co sulfate ASP (USD/t)  16,962   13,249   15,67718%-8%    16,962   14,615-14%  
    Ni-Co sulfate CC (USD/t)  10,464     8,822     8,278-6%-21%    10,464     8,549-18%  
    Cash margin (USD/ton)    6,498     4,426     7,39967%14%      6,498     6,066-7%  
    Sulfate margin as % of MHP74%83%86%  68%88%  
    Blended margin    8,567     4,852     7,93063%-7%      9,363     6,441-31%  
    Source: Company data, Verdhana research

     

    Fig. 2: NCKL – Key performance charts – quarterly trend

    Source: Company data, Verdhana research

    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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    This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

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    The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.


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    Rating Table

    Rating
    Remains    		Buy
    Target price
    Remains
    		IDR 1,260
    Closing price
    1 August 2024    		IDR 935

    Research Analysts

    Indonesia Research Team


    Michael Wildon (michael.wildon@verdhana.id)

    Tags: NCKL JK, NCKL IJ, Mining, Michael Wildon
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