Research & Stock Picks

Emiten Report

16 March 2023

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NKCL: Here Comes the New Challenger

PT Trimegah Bangun Persada (NCKL) is a vertically integrated nickel company mainly
operating on Obi Island. As of 2022, it operates two nickel ore mines and two smelters:
a rotary-kiln-electric furnace (RKEF) smelter (production capacity: 25ktpa) and an HPAL
smelter (37ktpa). NCKL targets to increase its FeNi production capacity to 219ktpa in
2025F and its HPAL smelter’s capacity to 120ktpa in 2024F. Valuation-wise, we believe
that NCKL has a slightly premium valuation to its peers (17.3x – 17.8x FY22 P/E) while
trading at a 2.6%-5.1% premium to its average industry multiple.
IPO proceeds allocation. PT Trimegah Bangun Persada (NCKL) is a vertically integrated
nickel company mainly operating on Obi Island. As of 2022, it operates two nickel ore
mines and two smelters: a rotary-kiln-electric furnace (RKEF) smelter (production
capacity: 25ktpa) and an HPAL smelter (37ktpa). With a bookbuilding range of IDR 1,220
– Rp 1,250 per share, NCKL might raise IDR14.8tn-IDR15.1tn in its IPO. NCKL will issue
12.1bn new shares, equivalent to 18.0% of its issued and paid-up capital. The planned
proceeds allocation is as follows: 1) 28% will be used for debt repayment, 2) 2% will be
used as Capex, 3) 32% will be used for subsidiary investment, including to fund its RKEF
and HPAL project, 4) and the rest will be used as working capital.
Huge expansion plan. NCKL targets to increase its FeNi production capacity to 219ktpa;
its 9ktpa and 185ktpa RKEF projects will commence production activities in 2Q23 and
2Q25, respectively. Meanwhile, the development of NCKL’s HPAL smelter will be divided
into three stages; the first stage (37ktpa) is completed and is currently running at full
capacity. The second stage (18ktpa, total: 55ktpa) is expected to commence production
activities in 1Q23. For the third stage, NCKL expects additional production of 65ktpa from
Lygend’s (NCKL’s partner) subsidiary, ONC (in which NCKL holds a 10% stake) starting in
1Q24, which should help boost NCKL’s total HPAL capacity to 120ktpa. Assuming all
projects come online, NCKL will become one of the biggest refined nickel producers in
Indonesia.
Slightly premium valuation to industry average (17.3x – 17.8x FY22 P/E). As of 11M22,
NCKL had booked a net profit of IDR 4.3tn (+239.6% YoY). If NCKL’s net profit is annualized,
with shares outstanding of 55mn, our valuation for NCKL is 17.3x – 17.8x FY22 P/E, while
trading at a 2.6%-5.1% premium to its average industry multiple

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