2Q25 Results: Above on higher JV earnings

Earnings above ours and cons due to higher-than-expected JV contribution. In 2Q25, NCKL posted earnings of IDR 2.2tn (-2.2% QoQ; +2.9% YoY), translating to 1H25 net income of IDR4.1tn, reaching 61.8%/56.3% of our/consensus unrevised estimates. The strong performance was driven by higher share in profit of associates of IDR 1.2tn (+93.7% YoY) on the back of higher HPL contribution due to increased NiSO4 cash margin of USD5k per tonne (+22.6% QoQ), coupled with solid cash margins across the board (figure 2). On the other hand, minority interests decreased to IDR538 (-12.4% QoQ) amidst earnings improvement, as NCKL recently raised ONC’s ownership to 40% (from 20%) in June 2025.

Updates on projects with KPS RKEF as main future growth driver. NCKL reported that the first phase of its KPS RKEF project was completed in 1Q25, while Phase 2, which consists of four lines already reaching 69% construction progress, is scheduled to commence production in 4Q25, with total capacity of 60tpa while Phase 3 reached 30% construction progess and is expected to reach COD by 1Q26. The project has total investment of USD 1.9bn. On the upstream side, the GTS mine (total investment: USD 0.5mn) is expected to begin operations in 2H25, and ores from the mine will be transported to a processing plant using tugs and barges. In addition, NCKL, with total investment of USD 70mn, is constructing 600ktpa quicklime plant, which is slated to begin production in 4Q25. We believe this facility will help further reduce HPAL operating costs, as its output will be used to support existing facility. Notably, all the above-mentioned projects are secure, fully funded by equity financing in a period when nickel prices were higher, alleviating execution risk and providing competitive advantage, particularly as most metal prices are currently downtrending.

Retain BUY with higher TP of 1,300 on most attractive valuation in the sector. We fined tuned our forecasts revising up 2025-26F earnings by 15.2%-34.4%, before raising to a more manageable hike of 7.8% in 2027F, as we incorporate higher JV earnings coming from increased ONC ownership to 40% and adjust down our cash cost reflecting 1H25 improvement. We reiterate BUY on NCKL with SOTP-based target price of IDR 1,300, reflecting 26F P/E 8.3x and 30.6% upside. We remain positive to NCKL’s longer-tem outlook amidst weakening nickel prices, as we believe positive catalysts remain supported by 1) additional income from the planned KPS expansion, 2) contribution from GTS mine and 3) potential decline in HPAL cash costs thanks to the new quicklime plant.  Hence, NCKL remains our top sector pick, mainly on its lowest cash cost in the sector. Risks to our call include 1) Weaker than expected nickel prices on lower demand from China and 2) regulatory changes.