Aneka Tambang (ANTM.IJ IDR 1.540 BUY.TP IDR 2,100) Expect soaring nickel ore volume to provide a cushion against declining nickel prices

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Aneka Tambang (ANTM IJ)

Expect soaring nickel ore volume to provide a cushion against declining nickel prices

We expect ANTM to book higher ore sales volume in FY24F to 15 mn tons (+28% yoy) vs. our previous est. of 11 mn tons.
We raised FY23F earnings forecast by 14.7% to Rp3.6tn due to one-off gains of Rp600bn booked in 4Q23.
Maintain Buy rating with higher TP of Rp2,100. ANTM’s nickel ore segment should provide a cushion against low FeNi prices.

Expect nickel ore segment to record strong volume growth in FY24F

ANTM booked nickel ore sales volume of 11.7mn tons in FY23 (broadly in line with our estimate of 11 mn tons), but well above their previous target of 9.4mn tons. We believe ANTM’s nickel ore sales volume will remain strong in FY24F as demand for ore should remain intact while supply may tighten due to stricter mining supervision from the government. Against this backdrop, we raise our FY24F nickel ore sales volume assumption by 36.4% to 15mn tons as we see its production capacity is sufficient to seize on the growing demand opportunity. This leads to our higher FY24F earnings of Rp3.6tn (up 22.7% from our previous est).

One-off gains of Rp600bn booked in 4Q23

ANTM divested FHT to HKCBL, with the latter purchasing 10% of ANTM’s shares in FHT and the entire 50% shareholding in FHT held by International Mineral Capital (IMC), ANTM’s wholly owned subsidiary. The value of the transaction reached Rp781.2 bn, with Rp130.2 bn for the 10% ownership of ANTM’s direct shareholding in FHT and Rp651 bn for the 50% ownership of IMC’s shares in FHT. The management indicated that ANTM would record one-off gains of Rp599bn in 4Q23. As a result, our 2023F earnings forecast was raised to Rp3.6 tn, up 14.7% from our previous est.

PKPU case suspension may potentially result in provision reversals

ANTM announced the withdrawal of the Suspension of Debt Payment Obligation (PKPU) lawsuit and as such, the legal process between ANTM and a Surabayan businessman has now ended and ANTM is freed from all liabilities arising from the PKPU lawsuit. This may potentially trigger a reversal of provisions.

Maintain Buy rating with higher TP of Rp2,100

At this stage, as we raise our earnings forecasts, we also upgraded our TP to Rp2,100 (Prev.Rp1,960) and maintain our Buy recommendation on ANTM as we believe the company’s nickel ore segment should provide a cushion against low FeNi prices. Key risks to our call are lower nickel prices and further impairments to its nickel assets due to low nickel prices.

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