Trimegah Bangun Persada (NCKL.IJ Rp 690; BUY TP Rp 1.300) Lowering FY25-26F est. Post 1Q25 Earnings Miss; Valuation Remains at a Bargain

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Trimegah Bangun Persada (NCKL IJ)

Lowering FY25-26F est. Post 1Q25 Earnings Miss; Valuation Remains at a Bargain

1Q25 net profit was below our estimate due to lower JV contribution as KPS is in the process of ramping up, and higher minority interest.
Growth projects remain intact, focusing more on GTS’ initiation in 2H25.
Reiterate our Buy rating with a lower TP of Rp1,300. Key risks to our call include lower nickel prices and a lower utilization rate.

1Q25 earnings below estimate due to higher minority contribution

NCKL recorded a net profit of Rp1.65tr in 1Q25, +7.6% qoq, +65.5% yoy, which was below our/cons estimate at 18%/22% of FY25F. Meanwhile, revenue grew to Rp7.1tr, +8.2% qoq, +18.1% yoy, which was in line with our/cons estimate at 26%/25%. Main reason for the underperformance in the bottom line was larger than expected non-controlling interest of Rp618bn, +271% qoq, as HJF recorded stronger profitability. Furthermore, its income from associates also missed expectations at Rp638bn (vs. our Rp3.6tr FY25F), as KPS is still ramping up and has yet to achieve an optimum profitability level at 3% NPM (HJF & MSP’s historical 10%-12% NPM).

Projects are continuing as expected

NCKL’s KPS 1^st phase was initialized in 1Q25, where its 1^st & 2^nd line reached full capacity in Jan25, while its 3^rd and 4^th line only reached full capacity in Feb-Mar25, which explains the lower earnings it recorded in 1Q25. Nonetheless, mgmt. confirmed the commencement of KPS phase 2 late 2025 and phase 3 in 2026. When combined, KPS will produce 185kt annually. On the upstream side, GTS mine is preparing to start operation in 2H25, which will supply ore for NCKL via the water route for cost efficiency. NCKL will spend a capex of US$60-70mn in FY25 that is mainly allocated for GTS’ operation, while the rest is for HJF & MSP maintenance after 2-3 years of operations.

Changes to our forecasts

We revised our FY25-26F income from JV by -15%/-13%/-13% to Rp3.1tr/3.3tr/3.3tr as we downgraded MHP ASP to US$12.8k/ton (from US$14k/ton) and increased MHP cash cost to US$6.6k/ton (from US$5.8k/ton). Furthermore, we have factored in royalty costs that will be applied starting 2Q25 towards its ore mining operations, which resulted in a decline in FY25-27F revenue forecasts by -2.0%/-1.1%/-1.1% to Rp26.7tr/27.6tr/27.6tr and net profits forecasts by -17.1%/-16.7%/-16.7% to Rp7.7tr/8.3tr/8.4tr.

Reiterate our Buy rating with a lower TP of Rp1,300

Taking into account our estimate adjustments, we lowered our TP on NCKL to Rp1,300 based on our SOTP valuation method and DCF on each project. Our TP implies FY25E PE of 10.5x vs. the current 5.6x FY25 PE. Key risks to our call include lower nickel prices, a lower utilization rate, and project execution delays.

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