Strong FY23 Finish but Not Out of The Woods Yet
Key Takeaways :
▪️INCO’s revenue throughout FY23 stood in-line with our estimates of USD1,209.7mn, coming in at USD1,232.3 (reflecting 101.9% of MNCS' estimate), growing by +4.5% YoY on solid production performance. Production jumped +17.7% YoY to 70.7k tons, credits due to their impeccable maintenance implementation throughout the year.
▪️The bottom-line stood at USD274.3mn, overshooting our estimate of USD221.2mn for the year (reflecting 124.0%), growing by +36.9% YoY despite ASP slump (-10.4% YoY to USD17.3k/ton in FY23).
▪️The impending divestment price (IDR3,070/share) is 23.3% discounted to INCO's TTM PBV (0.95x), or a 31.3% discount to median TTM PBV of nickel mining companies (1.06x).
▪️The recent correction in INCO’s share price may have been too aggressive in regards to its peers, reflected in its discounted TTM EV/EBITDA (3.6x vs. 6.0x) as well as its consensus’ forward EV/EBITDA (4.8x vs. 6.7x), providing some limited upside left.
▪️We recommend HOLD for INCO at a TP of IDR3,850/share considering lower FY24E performance on slacking nickel prices to linger due to oversupply pressures, along with carrying risks of growing LFP adoptions and unaccomodative stance from IRA policy. The target price implies a EV/EBITDA of 9.5x and a PBV of 0.9x for FY24F. Several key risks to our call include: 1) delays within the project pipelines, 2) surprises in nickel prices, 3) coal price volatilities, 4) impeded shares divestment progress.
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