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

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

<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

Independent Insight Provider, Bayon Financial

Mr. Cunningham is a CFA Charterholder with over 15 years of experience as an equity research analyst, mostly on the sell side at investment banks, including Goldman and Jefferies, and with some time on the buy side. He has covered the consumer, telecoms, financials, energy and mining sectors, with a focus mainly on Southeast Asia, including Thailand and Vietnam.

Graeme Cunningham
Independent Insight Provider
• Bayon Financial

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