Timah (TINS IJ)

Upgrading FY24-25F est. post 3Q24 earnings beat

• TINS’ 3Q24 performance beat our estimate due to stronger ASP and lower cash cost.
• We revised up our production/sales and ASP estimates, which increased our FY24-25F net profit est. by +59.9%/104.9% to Rp1.4tr/Rp1.9tr.
• We reiterate our BUY rating on stronger earnings prospects with higher TP of Rp2,300. Key risks are lower tin prices, sales, and higher cash costs.

3Q24: Strong net profit, despite lower revenue, due to COGS efficiency

TINS’ 3Q24 revenue slightly declined to Rp3tr, -3.6% qoq, with 9M24 totaling Rp8.3tr, +29.4% yoy, reaching 72%/76% of our/cons estimates. During the quarter, we saw COGS improvement of -8% qoq, which could be attributed to the operation of TSL Ausmelt, bringing 3Q EBIT to Rp732bn, +19% qoq. However, TINS recorded an unexpected impairment of Rp45.5bn on one of its dredgers in Singkep that is no longer operational. Furthermore, it also recognized a forex loss of Rp30bn. Nonetheless, its core profit still grew to Rp560bn in 3Q24, +48% qoq, bringing 9M24 net profit to Rp909bn, reaching 105%/79% of our/cons estimates.

FY24-26F forecast upgrades on more upbeat outlook

On the operational side, we decreased our production/sales estimates by -9%/-15% in FY24 and -19%/-23% in FY25. However, we increased our ASP assumption by 11% to US$30k/ton in FY24 and by 13.5% to US$29.5k/ton in FY25. Furthermore, we decreased our cash cost assumptions by -18%/-17% in FY24-25. Thus, our cash margin assumption grew significantly by +113%/+127% in FY24-25. Thus, though our revenue assumption declined by 2%/10% in FY24-25, we expect margin expansion in EBITDA and net profit levels by 66%/84% and 60%/105%, respectively, which brings our new net profit target of Rp1.4tr for FY24 and Rp1.9tr for FY25.

On the road to sustainable cash cost recovery

We have increased our ASP assumption due to the persistently strong LME Tin price that has hovered above US$30k/ton since 2Q24. We believe tin prices should remain elevated due to the declining rate of ore exports from Myanmar to China, which has lowered Chinese tin smelter utilization rates and output. On the other hand, we have lowered cash cost assumptions due to its robust 9M24 cost management, which we expect to sustain in the following year as TSL Ausmelt goes full steam.

Maintain Buy with an upgraded DCF-based TP of Rp2,300

We maintain our Buy rating with an upgraded DCF-based TP of Rp2,300. TINS currently trades at 5.8x FY25F PE and 3.0x FY25F EV/EBITDA, which lies at -1x std of its 5-yr EV/EBITDA band. Key risks to our call include lower tin prices, lower sales volume, and higher cash costs.

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