INCO - In-line 1Q24 Core Profit

KBVS Update
Tuesday, 2 July 2024

INCO - In-line 1Q24 Core Profit
(Initiate BUY - TP: IDR5,650)

1Q24 Core Profit Below Consensus Expectations but In-Line with Ours. In 1Q24, INCO's net profit was USD6.2 mn, a significant drop due to lower ASP and a derivative loss. Excluding the loss on fair value of derivative assets, INCO's core profit for 1Q24 would be USD19.07 mn, aligning with our full-year projections (22.7%) but below consensus expectations (13%). We anticipate improved performance in 2Q24 for core profit due to higher nickel ASP.

Completed the divestment process. INCO completed a major divestment, by selling shares to MIND ID and the new share issuance by transferring the pre-emptive rights to MIND ID. INCO has secured an extension of its operating permit until December 28, 2035, through the issuance of a Special Mining Business Permit (IUPK) received on May 13, 2024. This permit allows for further 10-year extensions under current regulations, maintaining the existing concession area.

New projects are progressing well and potential reserve addition. As of Mar’24, the Morowali project is 34% complete, Bahadopi is in the early stages at 6% completion, and Sorowako is awaiting internal approval for the final investment decision (FID). Notably, INCO's reserves surged significantly by the end of 2023. The company anticipates potential additions to limonite reserves from the Bahadopi and Sorowako mines in the future, from the ongoing exploration activities.

Reiterate BUY with lower TP of IDR5,650, which implied to 12.1x ’24F EV/EBITDA. We cut our TP following adjustment of total share outstanding number and capital injection from the right issue.

Regards,
Benyamin Mikael -KBVS Research