Bottom line: Expect some catching up going forward. BRMS should book higher net earnings in the upcoming quarters on the back of margin expansions caused by: 1) improved ore grade to 1.5g/t (1Q24: 1g/t), which would lead to lower raw materials cost/ton; 2) lower waste content, post BRMS having opened new drilling hole in 1Q24. That said, on the bottom line, we expect 1Q24 net profit of USD 3.6mn (+69% YoY), below our estimate (19%), to substantially improve going forward. On the top line, driven by a combination of higher sales volume (9,623oz, +278% YoY) and ASP (USD 2,083, +10% YoY), BRMS already posted robust 1Q24 revenue of USD 20mn (+46% QoQ; +250% YoY), reaching 28% of our FY24F top line, above SSI’s estimate.

Upgrading our gold forecasts with higher volume and price assumptions. We adjust upwards our forecasts partly due to higher gold production volume forecast to 43ktpa (prev: 35ktpa), as we expect recovery in ore grades ahead and increased production volumes from the new gold plant in Palu, Central Sulawesi (estimated operation date: 2H24). In addition, we respectively upgrade our 24F-25F global gold price assumption to USD2,300 per oz and USD2,600 per oz (Previously: 2,250 and 2,350) on potentially elevated gold prices as the Fed starts its rate cut cycle in a few months period. Hence, we increase our 24F-25F net income forecasts by 1% and 7% to USD19mn and USD35mn respectively.

On-the-ground check: growth from expansions to complete 2 new gold plants. We recently visited BRMS’ operational site in Palu. Several things caught our eye during the visit: 1) there are no issues with the new RKAB (mining permit). Hence, we expect the expansion plan to run smoothly; 2) BRMS’ Plant 2 can already hit full capacity by 2Q24, boosting our optimism that BRMS could post gold production volume of 43ktpa in 2024F (1Q24: 9ktpa). Moreover, our talks with the management reveal USD 119mn capex in FY24, doubling from FY23 level to allow completion of Plant 3 and 4 projects in Palu and Gorontalo. Furthermore, BRMS’ would attempt to secure funds to start monetizing other assets, including: 1) copper mine in Gorontalo; 2) gold mines in Banten and Aceh.

BUY with IDR 230 TP. On the back of expansion plans and gold exposure to fuel its growth, BRMS remains a BUY with SOTP-based TP of IDR 230, particularly given the Salim Group entry which we believe should improve BRMS’ GCG. Downside risks: 1) lower-than-expected gold prices on weaker demand; 2) uncertainties caused by the Fed; and 3) execution risks on their upcoming pipeline projects.