Timah (TINS IJ)

Expect a major turnaround in FY24F from improving tin mining practices

• TINS sets an optimistic FY24 production target of 30k tons (+100% yoy) of tin metal; we forecast a more conservative 26k tons (+69.5% yoy).
• We expect TINS to benefit from the current intensifying oversight of tin mining activities in Pangkal Pinang and Bangka Belitung.
• We reiterate our Buy recommendation with a lower TP of Rp1,400 as we apply lower LT tin price at US$25k/t (Prev: US$30k/t).

Expect production and sales volume to jump in FY24F

TINS aims to produce 30k tons of tin metal in FY24, representing an ambitious a +100% yoy vs. 15,340 metric tons of tin metal produced in FY23. The company’s commitment to enhancing production and improving performance is evident in its large Rp700bn capex budget for this year, of which 70% will be allocated to rejuvenating mining equipment. Although we believe there will be a gradual improvement in TINS’ production, the 1Q24 production may still be relatively low given delays in RKAB approval. For 1Q24, we forecast production is still below 6k tons before being ramped up in the following quarters. Thus, we forecast a more conservative FY24F production of 26k tons. 

Improvements in the tin mining industry will benefit TINS financially

The Indonesian govt has intensified its oversight of tin mining activities in Pangkal Pinang and Bangka Belitung. This move is expected to enhance mining practices, making it more feasible for TINS to acquire tin ore from local mining partners at better prices. Additionally, the stricter control over mining has impacted the supply of tin, contributing to the increase in the LME tin price since early FY24 and is now stabilizing at over US$30k/t. Given these conditions, we expect TINS to book earnings improvement, with FY24F net profit projected to reach Rp831bn, a significant recovery from FY23 net loss of Rp450bn. Our FY24F earnings est. is based on the following assumptions: ASP of of US$27k/t, sales volume of 26kt and cash cost of US$22.9k/t. 

Reiterate Buy with a lower DCF-based TP of Rp1,400

While we acknowledge the significant risk to TINS’ financials posed by the resurgence of illegal mining practices, we also observe a more rigorous crackdown on such activities. We anticipate that these efforts will have a lasting impact on improving tin mining practices in Indonesia. As a result, we reiterate our Buy rating on TINS, with a lower DCF based target price of Rp1,400 as we apply lower LT price at US$25k/t (Prev: US$30k/t) to anticipate potential more supply influx in the future.

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