MBMA: Enhanced Earnings Momentum with an Integrated Nickel Supply Chain

01 Jul 2024 Valdy

In 1Q24, MBMA’s revenue fell 2.25% to US$444.23 mn, and net profit dropped 41.3% QoQ to US$3.67 million. This was due to significant declines in Nickel Pig Iron (NPI) and Limonite Ore sales, impacted by adverse weather and equipment shortages. NPI production and sales also decreased, with an 8.6% QoQ drop in Average Selling Price (ASP) amid fluctuating nickel prices.

High-Grade Nickel Matte (HGNM) sales increased 18.4% QoQ to US$196.94 mn, despite lower production and a 3.82% drop in ASP to US$13,673/tonne. The revenue growth was driven by reduced purchasing costs for Low-Grade Nickel Matte (LGNM) and a 7.30% QoQ decline in All-In-Sustaining Cost (AISC), leading to a significant rise in cash margin by 2,905% QoQ to US$511/tonne.

MBMA is set for growth in 2024F with advancements in its High Pressure Acid Leach (HPAL) and Acid Iron Metal (AIM) projects. The AIM acid plant successfully delivered its first acid post-1Q24, with further developments expected by 2Q24 and 2H24. The PT ESG HPAL plant is targeting late 2024 for commissioning and subsequent nickel production. These projects are anticipated to enhance MBMA’s market position, diversify and increase revenue, and support long-term growth.

We assign a BUY rating to MBMA with a potential upside of 20.58% or IDR760 per share. This valuation is based on the Sum-of-the-Parts (SOTP) valuation method with a WACC rate of 11.43% and terminal growth of 5%. The positive outlook is driven by growth projects, AIM plant production, and the planned HPAL plant commissioning.

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