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26 November 2024

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NCKL: 3Q24 Results – BUY, SSI TP: IDR 1,200

Our take on the results (Bottom-line SSI: In-line, Cons: Above)

  • On 3Q24 top-line, strong nickel mining segment (17.5% of revenue) of IDR 1.3tn (+60.2% QoQ, +71.4% YoY) was supported by higher limonite sales of 5.08mn wmt (+69.3% QoQ, +103.2% YoY) amidst declining nickel prices (3Q24 avg: USD 16,259/ton, -20.1% YoY).
  • On the cost front, NCKL manage to improve its margins across the board with 3Q24 EBITDA margin having expanded to 39.1% (+510 bps QoQ, +150 bps YoY) on higher FeNi cash margin of USD 3,990/ton (+19.8% QoQ, +14.3% YoY) due to improved efficiencies, helped by raised FeNi production to 32.4 kton (+3.0% YoY), bringing 9M24 volumes to 95.8 kton (+39% YoY), 6.5% above NCKL’s name-plate capacity.
  • Looking ahead, NCKL is advancing its operations with the construction of a new RKEF plant, featuring four production lines and FeNi capacity of 60 ktons/year. The project is 77% complete, with operations expected to commence in 1Q25.
  • Supported by strong nickel ore sales and significant capacity expansion from RKEF projects, we retain our positive view on NCKL, particularly given that consensus will be revising up earnings. Our TP of IDR 1,200 reflects 8.6x P/E FY25F and 44% upside potential. BUY. Risks to our call: declining LME nickel prices due to over supplies and global economic slowdown, negatively affecting cash margins and earnings.

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