PT Hillcon Tbk (HILL IJ)

One of a kind

Hillcon provides full-service coal & nickel mining contracting services. Given the favorable macro dynamics in Indonesia’s nickel mining industry, the company will focus more on being a nickel mining contracting services provider in the future. The company posted strong revenues growth of CAGR 35.6% in 2020 – 2023. We initiate coverage on HILL with a BUY call and target price of IDR3,800.

Fully integrated mining and civil-works provider. The company has two main businesses: mining contracting services and civil construction services. In mining contracting services, the company started to provide these services in 2014 through a subsidiary called Hillconjaya Sakti (HS). The company provides open-pit mining contracting services for both nickel and coal mining from the mine plan, land clearing, overburden removal, waste removal & disposal and hauling & transport. The company also has extensive experience in civil construction services for earthworks, road construction, and river basin construction.

Focusing on expanding more into nickel mining services. Given the favorable macro dynamics in Indonesia’s nickel mining industry, the company will focus more on being a nickel mining contracting services provider in the future. HILL secured new projects with a single rate contract for ore-getting from Keinz Ventura (KVA) and Adhi Kartiko Pratama (AKP) in 2023. With these new clients, the company expects to add another 2.2 mn tons of ore-getting in 2024, thereby bringing the total ore-getting volume to 18 mn tons in 2024, up 38% yoy.

Strong revenues growth at 35.6% CAGR in 2020 – 2023. The company posted strong revenues growth of CAGR 35.6% in 2020 – 2023 mainly thanks to: a) Improving OB removal and coal-getting at Sebuku Tanjung Coal (STC) and the nickel mining services project at Weda Bay Nickel (WBN) which should improve further in the coming years as WBN targets more nickel production in the future.

Initiate coverage with a BUY.  Based on the valuation exercises that we have undertaken, we arrive at a target price of IDR3,800 based on relative valuation target PE of 12.4x. We are of the view that HILL warrants a premium valuation compared to its mining service peers as the company’s revenues mix is more driven by its nickel segment compared to its coal business.