Trimegah Bangun Persada (NCKL.IJ Rp 745; BUY TP Rp 1,500) Additional 10% stake in ONC lifts FY25 earnings

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Trimegah Bangun Persada (NCKL IJ)

Additional 10% stake in ONC lifts FY25 earnings

NCKL bought a 10% stake for Rp2.1tr, growing its income from JV to Rp3.2tr/ Rp3.3tr in FY25/ 26F.
We raised our FY25/26F forecast by +9.7%/+9.1% on the back of a stronger income from JV and a growing ore contribution.
Reiterate our Buy rating with a higher TP of Rp1,500. Key risks to our call include lower nickel prices and a lower utilization rate.

Earnings boost from ONC stake purchase

On the 13th of Dec24, NCKL disclosed an additional 10% stake purchase in ONC from Li Yuen for Rp2.1tr. This marks NCKL’s second purchase, having initially purchased a 10% stake in FY21 for Rp628bn. The source of funding for the acquisition was gained through the repurposing of IPO proceeds amounting to Rp1.6tr. Thus, at 20% ownership, NCKL will recognize ONC’s profit as profits from associates. Furthermore, combined with its ownership in HPL, NCKL effectively owns 37,800 tons of HPAL refining capacity.

FY25-26F forecast upgrades post ONC acquisition

We revised our FY25/26F share in profit of associates to Rp3.2tr/Rp3.3tr (from Rp2.2tr/Rp2.2tr), effectively raising our net profit estimate to Rp8.7tr/9.6tr (from: Rp7.9tr/Rp9.6tr). The increase of c.Rp1tr in profit of associates is attributable to the inclusion of ONC’s earnings after the additional 10% stake purchase, where we estimate ONC to record a FY25-26 NP of Rp4.7tr, assuming a 100% utilization rate and MHP ASP of US$12.3k/ton (vs. MHP avg. price of US$12.8k/ton in Jan’25).

Risks on RKAB limitation

Recently, the Director General of mineral and coal issued a statement regarding a possible cut of nickel ore quota should companies miss the guidelines given by the government regarding post-mining reclamation and environmental management. Currently, over 200mn tonnes of quota have been approved, though the ministry is looking to limit the quota to prevent an oversupply of ore. Based on the news, we believe that a reduction in release quota is unlikely to occur as the outcome would be catastrophic to the industry that is consuming more ore than ever along with growing HPAL smelters and rising demand for limonite ore. Should a reduction of quota be exercised, we believe MBMA and NCKL will be the most affected companies as it still purchases c.55% and c.30% of its ore through a 3rd party, which are prone to premium pricing.

Reiterate our Buy rating with an upgraded TP of Rp1,500

We reiterate our Buy rating in view of strong earnings growth of 31% yoy, derived from increased capacity from ONC and KPS, paired with its solid cash cost and increasing ore sales. Thus, we upgraded our TP to Rp1,500 based on our SOTP valuation method and DCF on each project. Our TP implies an FY25F PE of 11x vs. the current 5.4x FY25 PE. Key risks to our call include lower nickel prices, a lower utilization rate, and project execution delays.

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