MDKA: Improved 1H24 Results Boosted by Nickel Business
03 Okt 2024MDKA reported 1H24 revenue of US$1.09bn, reflecting strong 110.3% YoY growth, primarily driven by a 162.6% surge in nickel sales under PT Merdeka Battery Materials Tbk (IDX: MBMA), reaching US$921mn. Despite lower ASP for Nickel Pig Iron (NPI) and High-Grade Nickel Matte (HGNM), solid production and sales were supported by lower All-in-Sustaining Costs (AISC) and cash costs. MDKA achieved record production levels with 42.78kt of NPI and 25.44kt of HGNM, boosted by adding a third Rotary Kiln-Electric Furnace (RKEF) plant.
Gold Revenue Up, Copper Sales Down: MDKA’s gold sales volume in 1H24 was 51.63koz, down 4.24% YoY, but higher gold prices pushed ASP to US$2,182/oz, resulting in a 19.6% YoY increase in gold revenue to US$117.21mn. Conversely, Wetar’s copper sales dropped to 6.34kt with a lower ASP of US$3.92/lb, leading to a 20.5% YoY decline in revenue to US$54.47mn.
Margins Limited by Rising Costs: Despite EBITDA growth to US$139.91mn (1H23: US$74.52mn), the EBITDA margin fell to 15.09% (1H23: 19.32%) due to increased NPI production costs and higher finance costs of US$53.4mn. This led to a US$12.5mn loss attributable to owners.
FY2024 Outlook: We project MDKA’s net profit attributable to owners to reach US$63mn for FY24F, driven by the AIM and HPAL projects, and accelerated mine development at Wetar. Gold production is expected to reach 100koz—120koz, copper production at 14kt—16kt, while NPI production is revised to 80kt—85kt due to furnace relining in Sept-24.
Valuation: Using the Sum-of-the-Parts (SOTP) valuation method, we estimate MDKA’s fair value at IDR3,030 (15.77x / 4.77x expected EV/EBITDA and P/BV). The upside is supported by key growth drivers, particularly the nickel business, including the AIM and HPAL projects, which are expected boost earnings over 2024 – 2025 significantly. In addition to the nickel business, gold and copper prices are projected to maintain their upward trajectory, supported by China’s stimulus efforts and a dovish Federal Reserve policy, which should create favorable market conditions for commodity prices.
Key Risks: 1) A potential decline in metals demand; 2) Project execution delays; and 3) A hawkish shift by the Fed.
By PHINTRACO SEKURITAS | Research
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