Merdeka Battery Materials (MBMA.IJ Rp 256; BUY TP Rp 490) Shutting down HNMI for the Greater Good; Trimming Our Est. on Lower Output Assumptions

Stock Code	Last Price	Change	Change %
DSSA	47,550	1,650	3.59%
DNET	11,000	1,300	13.40%
TGKA	7,250	375	5.45%
TKIM	5,600	350	6.67%
CTBN	3,650	330	9.94%
INKP	5,700	325	6.05%
CITA	4,350	300	7.41%
AADI	6,900	175	2.60%

Merdeka Battery Materials (MBMA IJ)

Shutting down HNMI for the Greater Good; Trimming Our Est. on Lower Output Assumptions

FY24 result beat estimates as 4Q24 saw a turnaround to profitability of US$4.3mn from favorable commodity prices.
HNMI is temporarily shut down as it is loss making at current prices. The plant will operate subject to favorable pricing and contracts.
We lowered our FY25-27F earnings forecasts by -74%/-46%/-6% and TP to Rp490; reiterate Buy rating on upsides from growth projects.

FY24 result beat estimate

MBMA recorded a net profit of US$4.3mn in 4Q24 after posting a slight loss in the previous quarter, resulting in a FY24 NP of US$$22.8mn, +230% yoy, which was above ours/cons estimate at 112%/108% of FY24 est.. Meanwhile, 4Q24 revenue was relatively flat at US$465mn, +1.5% qoq, whilst FY24 revenue stood at US$1.8bn, +39% yoy, reaching 100%/100% of ours/cons estimate. The driver of profitability in 4Q24 was an improvement of NPI margin by +46% qoq to US$1,850/ton, and margin improvement from ore sales, where saprolite/limonite margin grew by +16%/+65% to US$5.8/wmt and US$8.9/wmt respectively.

Operation halt for HNMI due to unfavorable price

In 2025, MBMA have stopped production on HNMI, its 50ktpa high grade nickel matte converter, as the smelter is loss making as a result of a weakening LME nickel price, whilst input costs (NPI) have continued to push upwards. Moving forward, HNMI will only operate after it secured contracts, generally short-term at c.6 months. However, looking at a persistently weak LME nickel price, the shutdown of HNMI is the wiser choice as we estimate a negative cash margin of US$1,7k/ton should it continue running at current prices. On the other hand, continued shutdown of the plant could risk an impairment.

Trimming our forecast

As a result of the shutdown in HNMI, we have trimmed our FY25-27F revenue/earnings by -24%/-20%/-19% and -74%/-46%/-6% respectively. We have also lowered our assumptions of AIM’s utilization from 50% to 25% as delays persist in plant commissioning phase and HGNM utilization to 25% due to unfavorable market pricing. Furthermore, we increased our minority interest estimate that is similar to FY24 levels, which prompted significant earnings decline from our previous estimate.

Maintain Buy rating with a slightly lower TP of Rp490

We lowered our DCF-based TP to Rp490 to reflect our lower forecast. We maintain our Buy rating on valuation upsides from key growth projects. Key risks include a higher cash cost, lower ASP, and project delays.

… Read More 20250409 MBMA