International Nickel Indonesia (INCO) - Unaudited FY10 result

International Nickel Indonesia (INCO) – HOLD
Price: Rp5,050 -  Target Price: Rp4,700

Unaudited FY10 result

  • In FY10, INCO booked significant 67.7% revenue growth and 156.6% earnings growth. FY10 unaudited revenue was recorded at US$1,276 million while unaudited net income was recorded at US$437 million.
  • During 4Q10, INCO has a scheduled roof repair on furnace#4 to improve its life time and partial reline of reduction kiln #3 and #4.  As a result, production of nickel matte in 4Q10 declined 10% QoQ, while COGS/ton increased by 10%.
  • Significant increase in ASP has compensated the decline in nickel matte delivery which made FY10 earnings to go up by 156% YoY and also increasing net margin along the way to 34%.
  • Currently, INCO is traded at 13.5x – 12x PER’11F – 12F. We downgraded our recommendation from BUY to HOLD, however we maintain our target price as we are still waiting for the FY10 audited result that will provide more details and afterwards adjustment or revision can be made.
  • HOLD