73.1 y-y into IDR3.9 trillion. - ANTM All Divisions Flourish 20171228 NHKS Company Report (English)

(1)

Please consider the rating criteria & important disclaimer

In 3Q17, ANTM succeeded to post the profit amounting to IDR165 billion

(+504,4% y

-

y) after suffering the loss amounting to IDR503 billion in the

prior quarter. The 3Q17’s profit was buttressed by

the topping sales of

73.1% y

-

y

into IDR3.9 trillion.

The gold division posted the surge of 34.7% y

-

y in sales into IDR2 trillion,

the highest sales within the last two years

.

The jump in sales volume

from

2,676 kg in 3Q16 into 3,668 kg in 3Q17 was the potent driver for sales.

Soaring Demand for Ferronickel

Similar to the gold division, the ferronickel division also posted a significant

hike in 3Q17. The ferronickel sales volume picked up by 25.5% y

-

y into

5,025 Tni compared to the sales volume of 4,003 Tni in 3Q16. The upbeat

sales volume was accompanied by

the high demand for nickel by China, the

world biggest nickel consumer

.

Besides, the rally in global nickel price also surged the selling price of

ANTM’s ferronickel. In 3Q17,

the average selling price (ASP) of its

ferronickel hiked by 22.9% y

-

y

into USD12,739 from USD10,362 in 3Q16. It

is estimated that in 2018, the global nickel benchmark price will remain

higher at the average of USD10,000

-

USD11,000 per TNi. We estimate that

(2)

Brand New Day for Nickel Ore and Bauxite Ore Divisions

In 2Q17, after obtaining export license from the Ministry of Energy and

Mineral Resources, ANTM started to sale low nickel ore. It obtained the

export quota of 2.7 million wmt in May 2017. Then, in October 2017, it re

-obtained increment of 3.9 million wmt in the export quota.

In 3Q17,

its nickel ore export soared by 714.0% y

-

y

into 1.7 million wmt

compared to the export quota of 213 thousand wmt in 3Q16. Meanwhile,

the average selling price (ASP) also jumped by 36.8% into IDR143 million

per ton compared to the ASP of IDR104 million per ton in 3Q16.

Finally, in 3Q17,

it secured the sales of nickel ore amounting to IDR803

billion (+797.5% y

-

y)

higher than the sales of nickel ore amounting to

IDR89 million in 3Q16.

Another to the export license of nickel ore, it also obtained the license

export of bauxite ore. The sales volume of bauxite ore significantly hiked

after obtaining the export license with the quota of 850,000 ton per year.

In 3Q17, the sales of bauxite ore amounted to IDR198 billion (+433.5% y

-

y)

vs IDR37 billion in 3Q16.

In 3Q17, the bauxite ore division achieved the sales topping IDR100 billion

dramatically higher than the prior average sales of around IDR17 billion.

We gauge that the increment in export quota as the brand new day for the

nickel ore and bauxite ore divisions because the increment in export quota

was capable of dramatically boosting

the sales posted by both divisions.

In 3Q17,

the nickel ore division was capable of contributing by 20.3%

to

ANTM’s total sales usually at the average of 9%. Meanwhile, the bauxite

ore division was capable of contributing by 5.0% to ANTM’s total sales,

higher than the contribution of 0.9% in the prior period. In the coming

years, we gauge that these two divisions will pick their contributions up

along with the increment in the export quota.

Target Price of IDR870

(3)

Operational Performance

Gold Sales & Production Volume |

3Q15

-

3Q17

Source: Company, NHKS research

Average Selling Price Gold & Ferronickel |

3Q15

-

3Q17

Source: Company, NHKS research

Gold & Nickel Price |

3Q15

-

3Q17

Source: Company, NHKS research

Nickel Ore: Sales Volume vs Revenue |

4Q15—3Q17

Source: Company, NHKS research

Sales Composition |

3Q17

Source: Company

COGS Composition |

3Q17

(4)

Multiple Valuation

Forward EV/EBITDA band

| Last 1 year

Source: NHKS research

Dynamic Forward EV/EBITDA band

| Last 1 year

Source: NHKS research

Rating and target price update

Target Price Revision

Date

Rating

Target Price

Last Price

Consensus

vs Last Price

vs Consensus

9/8/2017

Buy

960 (Dec 2018)

695

760 +38.1%

+26.3%

12/28/2017

Buy

870 (Dec 2018)

630

815 +38.1%

+6.7%

Source: NHKS research, Bloomberg

Closing and Target Price

Source: NHKS research

Analyst Coverage Rating

Source: Bloomberg

NH Korindo Sekuritas Indonesia (NHKS) stock ratings

1. Period: End of year target price

2. Rating system based on a stock’s absolute return from the date of publication