MDKA - Anticipate improved performance onward

KBVS Update
Thursday, 6 June 2024

MDKA- Anticipate improved performance onward
(BUY- TP: IDR2,800)

1Q24 Net losses due to forex, financing costs, and minority interest.  MDKA reported a significant revenue increase of 152.6% yoy in 1Q24, reaching USD541 mn. This was driven by expanded RKEF plant capacity, a new high-grade nickel matte conversion facility, and increased limonite ore sales. Despite achieving an operating profit of USD21 mn (+14.1% yoy), the company faced a net loss of USD15.2 mn due to higher interest expenses, forex losses, and increased minority interest.

AIM project is progressing well. The AIM project saw a USD45 mn investment in 1Q24, with commissioning activities progressing and first acid produced in April 2024. Further commissioning is scheduled for later in the year, with the project expected to contribute to EBITDA from 4Q24.

New milestone on the HPAL project The HPAL project, a joint venture, secured up to USD490 mn  in financing, ensuring funding for construction. By the end of May 2024, the project was 34.8% complete with commissioning expected in late 2024.

We upgraded MDKA to BUY with TP of IDR2,800 following recent share price declined. Following on the recent share declined, we upgrade MDKA to BUY based on the SOTP method with TP of IDR2,800, our TP is implied to 12.6x ‘24F EV/EBITDA. Catalysts for 2024 are 1) higher production growth in 2024, 2) more progress on the next AIM, HPAL &TB Copper project, and 3) lower nickel surplus expectation of ~100kt (previously ~190kt).

Best Regards,