Research & Stock Picks

Emiten Report

13 November 2023

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AMMN: HOLD (Maintain), TP at 7,000 – Huge Turnaround

uge Turnaround

We adjusted our projections for AMMN by putting in the cumulative 2020-2022 non-tax government revenue (PNBP), which was booked in 3Q23. We expect more non-tax government revenue payment in 4Q23 of 10% of AMMN’s 2023F net profit. Hence, we slashed our 2023F net profit projection to USD 144mn. Nevertheless, we foresee huge jumps in earnings in 4Q23 and 2024F, supported by: 1) the possibility of higher operational figures after the company fixed operational issues that occurred in 1H23, and 2) normalization of non-tax government revenue. All in all, we maintain our HOLD rating with a higher TP of IDR 7,000 per share (Previously: IDR 5,500 per share)

Potential inclusion into the MSCI Index in November. We believe AMMN has a short-term positive catalyst in the form of its potential inclusion into MSCI Indonesia, as its ADTV over the past three months has reached USD 22.3mn per day, and its free float adjusted market capitalization has reached USD 34.3bn.

Expect a huge jump in 4Q23. We expect AMMN to book a huge jump in earnings in 4Q23, mainly driven by the increase in higher-grade ore input from Phase 7 (better grade than the company’s stockpile), which should translate into higher copper and gold production. To note, fresh ore contributed around 50% of AMMN’s total mill throughput in 3Q23 (in 1H22: 100% from stockpile). Hence, we expect AMMN to book QoQ copper and gold production volume growth of 27.5% and 74.5% in 4Q23. For information, we put more conservative figures compared to the company’s copper and gold guidance of 337 Mlbs and 502 Koz (our estimate: 292 Mlbs and 453 Koz).

Better copper prices in the long run. We noticed that in 2023, global copper production went up due to the ongoing ramp of the Qualleveco and Kamoa Kakula mines. Nevertheless, we believe that the growth in supply won’t be as significant in the long run, since the limited capital spending for exploration might lead to depleted reserves and lower ore grade. On the other hand, global copper demand will increase considerably as renewable energy and EVs become more common (copper is an important material in renewable energy generation and in EV batteries). Thus, we expect the CAGR of global copper demand to outpace global copper supply (projected 2023F-2023F CAGR: 3.9% vs 2.2%).

Forecast adjustments; maintain HOLD with a higher TP of IDR 7,000/share. We adjusted our projections for AMMN by putting in the cumulative 2020-2022 non-tax government revenue (PNBP), which was booked in 3Q23. We expect more non-tax government revenue payment in 4Q23 of 10% of AMMN’s 2023F net profit. Hence, we slashed our 2023F net profit projection to USD 144mn. Nevertheless, we foresee huge jumps in earnings in 4Q23 and 2024F, supported by: 1) the possibility of higher operational figures after the company fixed operational issues that occurred in 1H23, and 2) normalization of non-tax government revenue. All in all, we maintain our HOLD rating with a higher TP of IDR 7,000 per share (Previously: IDR 5,500 per share).

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