ANTM - Expect Earnings Turnaround in The Following Quarters

KBVS Update
Tuesday, 21 May 2024

ANTM- Expect Earnings Turnaround in The Following Quarters 
(Maintain BUY - TP: IDR1,865)

Weak 1Q24 profitability mostly driven by lower production and ASP. ANTM booked IDR238 bn of net profit in 1Q24 (-85.1% yoy; +4.1% qoq) due to declined in revenue to IDR8.6 tn (-25.6% yoy;-15.1% qoq) from lower nickel price as well as lower nickel ore production (-57.1% yoy), caused by delays in the approval of the company's RKABs. Out of the eight RKABs awaiting approval, five have been approved.

Expect earnings turnaround in the following quarters. With the nickel ore production levels improving since Mar’24, we anticipate a recovery in the coming quarters. Despite the weak production levels in 1Q24, we expect nickel ore sales volume to grow in 2024, reaching 12m wmt (+2.5% yoy).The recent surge in nickel prices, driven by factors such as the Russian nickel ban on the LME, delayed RKAB approvals in Indonesia, and riots in New Caledonia, is expected to contribute significantly to a profit turnaround in 2Q24. Nevertheless, it is important to note that these high nickel prices are unlikely to be sustainable in the long term.

Expect ANTM to booked IDR2.55 tn of net profit in 2024 (-17% yoy).  We have revised our 2024 net profit forecast for ANTM to IDR2.55 tn, up from our previous estimate of IDR 2.2 tn. This upgrade is mainly driven by our expectation of slightly higher ASP in 2024, due to lower cash cost expectation, as well as anticipated forex gains in 2024.

We maintain BUY on ANTM with a higher target price of IDR1,865 using DCF-based TP (WACC: 11.5%; LTG: -3%), which implied to 10.3x ‘24F EV/EBITDA. We like ANTM due to strong production outlook in the years on the nickel ore business, alumina, potential cost reduction in FeNi business, and it’s involvement in the EV ecosystem.

Regards,
Benyamin Mikael -KBVS Research