International Nickel Indonesia (INCO) - Attractive valuation yet lagging value

INCO – Maintain BUY
Price: Rp4,125 – Target Price: Rp5,950

Attractive valuation yet lagging value

  • INCO recorded 16% YoY revenue growth and 9% YoY net profit growth in 1H11.
  • In QoQ term, INCO recorded 22% growth in revenue and 13% net profit growth.
  • 1H11 performance was below our estimate, revenue was 45% and net profit was 39% from our projection.
  • INCO managed to ramp up production in 2Q11, as promised, and in-line with our estimation of production.
  • We maintain our Buy recommendation as the stock valuation is still attractive and currently trading at 7.18x PE’11F vs. 11.93x PE’11F of average peers.
  • Maintain Buy