JAKARTA - Analysts believe that increases in nickel price and production volume can improve the performance of PT Vale Indonesia Tbk (INCO), which is currently under pressure. Based on the company’s first quarter financial statement, INCO’s revenue dropped 25.83% year on year (yoy) to US$ 126.42 million, which resulted in a US$ 20.16 million loss.
In addition, the company’s production in the period also fell 36% yoy, which prompted INCO to revise this year’s matte nickel production volume target to 71,000-73,000 metric tonnes.
According to Ciptadana Sekuritas Asia analyst Thomas Radityo, INCO’s negative performance in Q1 was caused by the company’s average selling price (ASP), which dropped 7.8% yoy to US$ 9,117 per metric tonne. Nevertheless, he believes that INCO’s nickel production will be back to normal.
In addition, Mr Radityo added, the company’s Q2 performance will be supported by rising nickel prices. As reported by Bloomberg, as of Monday (15/7) nickel price for three months’ delivery at the London Metal Exchange (LME) surged 27.83% to US$ 13,655 per metric tonne.
“Supplies at the LME are decreasing, which causes prices to increase and brings a positive sentiment for INCO,” said Mr Radityo as quoted by Kontan.co.id, Tuesday (16/7). He projects that the company’s ASP will improve to US$ 10,500 per metric tonne, although its negative performance in Q1 prompted him to revise his forecast of INCO’s operating revenue this year to US$ 70 million, and net profit to US$ 47 million.
Mr Radityo has also lowered INCO’s forecast stock price from Rp 3,600 to Rp 3,350 per share, although he still recommends that investors buy INCO shares due to his confidence in the prospect of the nickel industry. The confidence is mainly driven by a planned divestment of a 20% stake in INCO to PT Indonesia Asahan Aluminium (Persero) Tbk or Inalum. (MS)