Bayon Financial

Graeme Cunningham

Independent Insight Provider

Bayon Financial provides industry and company analysis focusing on mid and small cap equity research coverage across a range of sectors including mining, financials and telecoms.

Equity Bottom-Up

<ul>
<li>Vale Indonesia's Q1/25 net profit beat estimates only on non-core items, with a reversal to a gain from Q1/24 on the fair value recognition of a derivative asset </li>
<li>Core earnings declined yoy on an unexpected maintenance shutdown-driven decline in volume and nickel price drop which offset a decline in costs</li>
<li>Trading at a P/B of 0.5x and with peers also well below 1.0x, much of the industry's current distress has been priced in, but immediate catalysts are few </li>
</ul>


Vale Indonesia's Q1/25 net profit beat estimates only on non-core items, with a reversal to a gain from Q1/24 on the fair value recognition of a derivative asset 
Core earnings declined yoy on an unexpected maintenance shutdown-driven decline in volume and nickel price drop which offset a decline in costs
Trading at a P/B of 0.5x and with peers also well below 1.0x, much of the industry's current distress has been priced in, but immediate catalysts are few 


Vale Indonesia: Still Battling Nickel Price Decline in Q1/25

<ul>
<li>Vale Indonesia has released the first guidance for its new projects with nickel matte to shift from 100% of revenue to 49% by 2029E, with nickel ore rising to 48%</li>
<li>S&amp;P has upgraded the company’s credit rating to BB+ from BB, placing it ahead of Indonesia’s BB- country rating and below the BBB rating of parent company Vale   </li>
<li>We expect a weak nickel price will weigh on the shares in early 2025, although there could be considerable long-term upside from new projects and multiples remain low </li>
</ul>


Vale Indonesia has released the first guidance for its new projects with nickel matte to shift from 100% of revenue to 49% by 2029E, with nickel ore rising to 48%
S&amp;P has upgraded the company’s credit rating to BB+ from BB, placing it ahead of Indonesia’s BB- country rating and below the BBB rating of parent company Vale   
We expect a weak nickel price will weigh on the shares in early 2025, although there could be considerable long-term upside from new projects and multiples remain low 


Vale Indonesia: First New Project Guidance, Rating Upgrade

<ul>
<li>Vale Indonesia's Q4/24 results came in -28% below expectations driven mainly by a revenue decline, as core costs fell, and other expenses and net financing income rose</li>
<li>The revenue drop was from by a -7.1% decline in volume and -11.5% drop in the nickel matte price, while fuel efficiency improved and fuel costs dropped overall</li>
<li>The P/B continued to slide in Q4/24 to 0.82, along with an ROE down to 1.0%, but even given the inexpensive multiple, weak nickel could weigh on the stock</li>
</ul>


Vale Indonesia's Q4/24 results came in -28% below expectations driven mainly by a revenue decline, as core costs fell, and other expenses and net financing income rose
The revenue drop was from by a -7.1% decline in volume and -11.5% drop in the nickel matte price, while fuel efficiency improved and fuel costs dropped overall
The P/B continued to slide in Q4/24 to 0.82, along with an ROE down to 1.0%, but even given the inexpensive multiple, weak nickel could weigh on the stock


Vale Indonesia: Q4/24 Earnings Drop on Volume, Nickel Price Decline

<ul>
<li>Vale Indonesia's Q3/24 results came in below expectations with net income -8.1% below consensus, although there was a slight 0.4% beat for revenue </li>
<li>Revenue dropped -17.6% yoy, hit by a -20.1% decline in the nickel matte price as volume rose 3.1%, which offset a -0.6% decline in cost of revenue </li>
<li>We expect short-term pressure on the shares, with ROE and P/B near two decade lows, as nickel could remain weak and new projects could be a H2/25 driver </li>
</ul>


Vale Indonesia's Q3/24 results came in below expectations with net income -8.1% below consensus, although there was a slight 0.4% beat for revenue 
Revenue dropped -17.6% yoy, hit by a -20.1% decline in the nickel matte price as volume rose 3.1%, which offset a -0.6% decline in cost of revenue 
We expect short-term pressure on the shares, with ROE and P/B near two decade lows, as nickel could remain weak and new projects could be a H2/25 driver 


Vale Indonesia - Q3/24 Nickel Price Slide Offsets Cost Decline

<ul>
<li>Pure nickel play PT Vale Indonesia, a leading global producer, could transform significantly over the next few years with plans to take stakes in projects more than doubling current output</li>
<li>However, we see risks of a lull into 2025 as production is near capacity, the nickel price could potentially remain pressured from major global oversupply and operating costs could rise   </li>
<li>Given the weak consensus 2025E ROE of 5%, a 1.6x P/B is not particularly inexpensive, although for longer-term investors considering the expansion potential this could be an entry point  </li>
</ul>


Pure nickel play PT Vale Indonesia, a leading global producer, could transform significantly over the next few years with plans to take stakes in projects more than doubling current output
However, we see risks of a lull into 2025 as production is near capacity, the nickel price could potentially remain pressured from major global oversupply and operating costs could rise   
Given the weak consensus 2025E ROE of 5%, a 1.6x P/B is not particularly inexpensive, although for longer-term investors considering the expansion potential this could be an entry point  


Vale Indonesia: Potential Lull Before Big Transition For Pure Nickel Play

Indonesia

PT Vale Indonesia Tbk produces nickel in matte, an intermediate product, from lateritic ores at its integrated mining and processing facilities near Soroako, Sulawesi

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Vale Indonesia Tbk (INCO IJ)

Vale Indonesia: Still Battling Nickel Price Decline in Q1/25

Vale Indonesia's Q1/25 net income beat on non-core items but core operations declined on an unexpected maintenance-driven volume decline and lower...

Graeme Cunningham

Vale Indonesia: First New Project Guidance, Rating Upgrade

Vale Indonesia reported first guidance for new projects expected to transform its revenue from 100% nickel matte to a roughly 50/50 matte/nickel...

Graeme Cunningham

Vale Indonesia: Q4/24 Earnings Drop on Volume, Nickel Price Decline

Vale Indonesia's Q4/24 missed expectations mainly on a revenue drop, driven by a volume and price decline, as core costs edged down, and while...

Graeme Cunningham

Vale Indonesia - Q3/24 Nickel Price Slide Offsets Cost Decline

Vale Indonesia's Q3/24 came in below expectations, as a nickel decline drove down revenue, offsetting a cost improvement, with ROE and P/B for 2024...

Graeme Cunningham

Vale Indonesia: Potential Lull Before Big Transition For Pure Nickel Play

While pure nickel play PT Vale Indonesia could more than double its capacity over the next few years through new projects, it could face a short...

Graeme Cunningham

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