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Company Reports

04 November 2024

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INCO: 3Q24 Results – SELL, SSI TP: IDR 3,400

Strength

Positive growth in 3Q24 production (to 18,008 tons; +8.6% QoQ, +0.3% YoY) and sales volumes (17,749 tons;+1.0% QoQ, +3% YoY), driven by improvement in average nickel ore grade to 1.79% (+4% QoQ) thanks to increased calcine output

Weakness

Considerable decline in 3Q24 earnings due to decreased ASP to USD 12,948/ton (-8.9% QoQ, -20.1% YoY), which led to cash margin reduction to USD 2,974/ton (-31.0% QoQ, -51.8% YoY); low cash margins resulted in OPM drop to 2.7% (-1,100 bps QoQ, -1,860 bps YoY)

Opportunity

INCO’s pilot ore sales program (subject to RKAB approval) and planned commercialization of its RKEF and HPAL smelters (2026F) could serve as positive catalysts for future earnings growth; severe market underperformance could provide investors with buying opportunities

Threat

Global oversupply issue, weak demand outlook for stainless steel in China, and LFP battery ramp-up signal further pressure on prices; lack of growth catalyst and disappointing margins prompt us to cut our call to SELL with TP of IDR 3,400, reflecting 34.0x 2025F P/E; this may cause continued market underperformance

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