INCO - Anchored by ASP, Capacity Surge on the Horizon

KBVS update
Friday, 22 May 2026

INCO – Anchored by ASP, Capacity Surge on the Horizon       
(Maintain BUY; TP IDR5,600)

■ ASP strength compensates for softer volumes: INCO 1Q26 revenue came in at USD253 mn (-11.3% QoQ, +22.3% YoY) supported by a stronger nickel matte ASP of USD14,213/ton (+15.5% QoQ, +19.1% YoY), though production fell to 13,620 tons (-20.1% QoQ, -20.0% YoY) due to RKAB approval delays and Furnace 3 reconstruction.

■ Margin expansion reflects pricing power: Gross margin expanded to 22.5% (vs. 13.1% in 4Q25), EBITDA rose to USD82 mn (margin: 32.6%), and net profit to USD44 mn (+100.1% YoY, +84.7% QoQ). Net margin of 17.3%, however, still trailed KBVS & consensus FY26F estimates of 21.0% and 19.8%.

■ Production recovery and HPAL ramp-up progressing as planned: INCO's output is set to accelerate with Furnace 3 rebuild completing by end-1H26, targeting FY26F production of 67,645 tons, while JV HPAL ramp-ups at Pomalaa (3Q26), Sambalagi (4Q26), and Sorowako (2Q27) will bring total integrated capacity to 240 ktpa. Pomalaa's low-MgO limonite ore (~1.7% vs. market avg ~3.0%) enabling more efficient sulfur consumption at a time when input prices are under pressure from geopolitical headwinds.

■ Compelling growth trajectory: We project INCO's FY26-27F revenue at USD1,395 mn / USD1,799 mn (+40.8% / +29.0% YoY, 5-yr CAGR: 5.8%), with gross margins expanding sharply to 22.1% / 34.8% (vs. 11.2% in 2025) and EBITDA reaching USD423 mn / USD747 mn (margins: 30.3% / 41.5%). On the bottom line, net profit is projected to reach USD207 mn / USD486 mn, driven by higher ASPs and operational efficiencies.

■ BUY with TP at IDR5,600/ share: We reiterate BUY on INCO with a TP of IDR5,600/share (FY26F EV/EBITDA: 7.5x, P/E: 16.8x), underpinned by production recovery, firmer nickel prices, growing ore sales, and medium-term HPAL upside. Key risks include nickel price volatility, RKAB delays, rising fuel/sulfur costs, potential export duties, windfall taxes, and export agency uncertainties.

Regards,
Ashalia Fitri - KBVS Research team