Research & Stock Picks

Emiten Report

04 December 2023

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NCKL: BUY (Maintain), TP at IDR 1,500 – Buying Manhattan for Beads

NCKL posted a net profit of IDR 1.7tn in 3Q23, bringing its cumulative 9M23 bottom line to IDR 4.5tn (+23.8% YoY), in line with ours and cons at 74.8% and 78.1%, respectively. The earnings growth in 3Q23 was mainly attributable to higher sales volume (partly thanks to higher output from the company’s HJF smelter [+70.6% QoQ]), which offset the drop in ASP. In addition, we see a positive catalyst coming from the company’s recent mine acquisitions; aside from their low prices, we believe those assets will ensure the implementation of NCKL’s expansion plan. We reiterate our BUY rating on NCKL with an unchanged TP of IDR 1,500 per share, implying a 2024F P/E of 10.1x.

Earnings in line with ours and cons. NCKL posted revenue of IDR 7.1tn in 3Q23 (+29.3% QoQ; 265.4% YoY), translating into cumulative 9M23 revenue of IDR 17.3tn (+135.1% YoY), in line with ours and cons at 77.4% and 77.0%, respectively. The revenue growth in 3Q23 was mainly driven by higher sales volume (partly thanks to the increase in output from the company’s HJF smelter of 70.6% QoQ), which offset the drop in ASP. On its bottom line, NCKL posted a net profit of IDR 1.7tn (+24.9% QoQ) in 3Q23, bringing its cumulative 9M23 bottom line to IDR 4.5tn (+23.8% YoY), in line with ours and cons at 74.8% and 78.1%, respectively.

Positive catalyst from acquisitions. We believe the recent acquisition of a 29% stake in the GPS mine and a 99% stake in the GTS mine might be a positive catalyst for NCKL. Assuming prices of USD 10/ton for limonite and USD 15/ton for saprolite, with total reserves of USD 20mn Wmt (GPS mine) and USD 38mn Wmt (GTS mine), our calculation suggested that the fair values of those assets are USD 220mn and USD 400mn, much higher than what NCKL actually paid for both (USD 3.1mn and USD 0.5mn respectively). In addition, we believe those assets will secure NCKL's operations for the foreseeable future, given the company's intention to expand its smelter capacity.

Maintain BUY with an unchanged TP of IDR 1,500/share. We reiterate our BUY rating on NCKL, with an unchanged TP of IDR 1,500 per share, implying a 2024F P/E of 10.1x. Downside risks: lower-than-expected commodity prices and regulatory changes.

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