Aneka Tambang Bloomberg: ANTM.IJ | Reuters: ANTM.JK Metal Mining Sector 16 February 2021 JCI Index: 5,310 BUY (Unchanged) Boosting the Downstream Market Target Price (IDR) 3,230 (from 1,480) High domestic demand becomes a positive catalyst for ANTM, who recorded nickel Potential Upside (%) 12.5 ore production growth of +46% yoy/+27.6% qoq in 4Q20 to 1.9 million WMT. We Price Comparison raise our assumptions for ANTM’s nickel ore sales in FY21F-22F to 3.8-4.4 million Cons. Target Price (IDR) 2,807 WMT, with nickel price assumptions of USD 17,300-18,200/tonne. We maintain BUY SSI vs. Cons. (%) 115.1 and raise our TP to IDR 3,230, reflecting 16.1x FY21F EV/EBITDA. Higher domestic absorption doubled nickel ore sales. ANTM’s nickel ore production Stock Information rose to 1.9 million WMT (+46% yoy/+27.6% qoq) with sales volume of 2.1 million WMT Last Price (IDR) 2,870 (+1.5% yoy /+100.1% qoq). Sales, which decreased in 1H20 due to the export ban, Shares Issued (Mn) 24,031 began to show signs of recovery in line with strengthening domestic demand for Market Cap. (IDR Bn) 68,968 smelters and as raw material for FeNi. Regarding FeNi sales, it was quite stable with a 52-Weeks High/Low (IDR) 3,180/348 growth of +2.5% qoq (+2% yoy) in 4Q20 to 6,639 TNi. 3M Avg. Daily Value (IDR Bn) 1,818.0 Commodities uptrend, assumptions upgrade. In FY20, ANTM made a new record in Free Float (%) 34.9 FeNi production of 25,970 TNi (+1% yoy), which was entirely absorbed by the export Shareholder Structure: market (East Asia and South Asia). We project ANTM’s FeNi sales to grow moderately MIND ID (%) 65.0 to 30,100-34,700 TNi in FY21-22F (2019: 26,212), since the export market has not fully Public (%) 35.0 recovered. For nickel ore, we are quite optimistic about its prospects for FY21-22F, mainly due to the high domestic absorption. We raise our assumptions for ANTM’s Stock Performance nickel ore sales in FY21-22F to 3.8-4.4 million WMT (prev: 0.9-0.7 million WMT), with (%) YTD 1M 3M 12M nickel price assumptions of USD 17,300-18,200/tonne. Absolute 48.3 (8.0) 142.2 325.2 Gold sales growth assumption of +5.1% yoy. ANTM’s gold production in 4Q20 JCI Return 5.2 (1.3) 14.5 7.3 decreased -18.1% yoy/-10.6% qoq to 388 kg, while its sales also fell by -5.2% yoy/- Relative 43.1 (6.7) 127.7 317.9 0.6% qoq to 6,921 kg. In FY20, ANTM’s gold production and sales declined by -14.8% and -35.9% yoy, respectively. We believe ANTM's choice to focus on the domestic Stock Price & Volumes, 12M market is a good choice due to the growing interest to invest in gold in Indonesia. The increase in domestic demand for gold can maintain ANTM's gold trading business stability, which has been quite vulnerable to fluctuations in the USD/IDR exchange rate. SSI projects ANTM's gold sales to increase +5.1% yoy in FY21F to 22,900 kg, while also raising our assumptions for average gold prices in FY21-22F to USD 2,000-2,100/t oz. Maintain BUY, raise TP to IDR 3,230. SSI’s TP reflects PE FY21F-22F of 28.0-21.9x with +12.5% upside potential. Currently, ANTM is trading at +1 SD above its 5-year PE band. ANTM shares had strengthened by +142.2% over the past three months. Company Background Forecasts and Valuations (@ IDR 2,870 per share) ANTM is an export-oriented, diversified, and vertically Y/E Dec 18A 19A 20F 21F 22F integrated mining company. ANTAM's activities include Revenue (IDR Bn) 25,275 32,719 26,108 29,660 33,811 exploration, mining, processing and trading of nickel EBITDA (IDR Bn) 2,400 2,066 3,163 4,133 4,747 ore, ferronickel, gold, silver, bauxite, coal and alumina. EV/EBITDA (x) 10.0 12.2 22.7 16.9 14.1 Net Profit (IDR Bn) 1,636 194 1,501 2,462 3,142 EPS (IDR) 68 8 62 102 131 EPS Growth (%) 1,098.6 (88.1) 674.2 64.0 27.6 P/E Ratio (x) 42.2 355.6 45.9 28.0 21.9 BVPS (IDR) 767.7 754.6 806.2 868.2 924.5 P/BV Ratio (x) 3.7 3.8 3.6 3.3 3.1 DPS (IDR) 2.0 12.7 2.8 21.9 35.9 Dessy Lapagu Dividend Yield (%) 0.3 1.5 0.1 0.8 1.2 +62 21 2854 8392 ROAE (%) 8.9 1.1 8.0 12.2 14.6 [email protected] ROAA (%) 5.3 0.6 4.5 6.3 7.2 Interest Coverage (x) 1.4 4.1 10.2 13.9 20.2 Net Gearing (%) 30.6 27.3 15.0 3.7 n.c. www.samuel.co.id Page 1 of 4 Aneka Tambang Bloomberg: ANTM.IJ | Reuters: ANTM.JK Metal Mining Sector 16 February 2021 JCI Index: 5,310 Exhibit 1. Production and Sales Volume Unit 4Q19 3Q20 4Q20 yoy (%) qoq (%) 2019 2020 yoy (%) Production Volume Ferronickel (TNi) 6,660 6,371 6,837 2.7 7.3 25,713 25,970 1.0 Nickel ore (Wmt) 1,301,233 1,488,988 1,900,181 46.0 27.6 8,696,479 4,763,238 (45.2) Gold (Kg) 474 434 388 (18.1) (10.6) 1,962 1,672 (14.8) Silver (Kg) 4,286 2,933 2,539 (40.8) (13.4) 16,458 11,992 (27.1) Bauxite (Wmt) 396,894 490,627 255,510 (35.6) (47.9) 1,726,734 1,553,457 (10.0) Alumina (Ton) 29,916 19,470 21,922 (26.7) 12.6 104,537 92,606 (11.4) Sales Volume Ferronickel (TNi) 6,510 6,479 6,639 2.0 2.5 26,212 26,163 (0.2) Nickel ore (Wmt) 2,054,543 1,042,568 2,086,118 1.5 100.1 7,558,733 3,296,292 (56.4) Gold (Kg) 7,300 6,961 6,921 (5.2) (0.6) 34,016 21,797 (35.9) Silver (Kg) 3,654 5,368 3,401 (6.9) (36.6) 20,235 14,589 (27.9) Bauxite (Wmt) 659,800 386,089 275,570 (58.2) (28.6) 1,659,920 1,226,836 (26.1) Alumina (Ton) 18,643 20,176 21,912 17.5 8.6 70,527 82,785 17.4 Source: Company Data, SSI Research Exhibit 2. Forecast Changes New Old Change (%) 21F 22F 21F 22F 21F 22F FeNi Sales Volume (TNi) 30,100 34,700 35,400 38,900 (14.97) (10.80) Nickel Ore Sales Volume (mn Wmt) 3.8 4.4 0.9 0.7 343.88 500.46 Gold Sales Volume (Kg) 22,900 24,100 28,600 31,500 (19.93) (23.49) Nickel Price (USD/ton) 17,300 18,200 16,100 17,100 7.45 6.43 Gold Price (USD/toz) 2,000 2,100 1,900 2,100 5.26 - Revenue (IDR Bn) 29,660 33,811 35,251 42,035 (15.86) (19.56) Operating Profit (IDR Bn) 3,199 3,896 1,135 1,353 181.87 187.93 EBITDA (IDR Bn) 4,133 4,747 2,103 2,215 96.49 114.28 Net Profit (DR Bn) 2,462 3,142 674 882 265.53 256.22 EPS (IDR) 102 131 28 37 265.53 256.22 BVPS (IDR) 868 925 750 725 15.72 27.45 EV/EBITDA (x) 16.9 14.1 15.82 15 6.67 (2.67) P/E Ratio (x) 28.0 21.9 44.4 34 (36.93) (35.29) P/BV Ratio (x) 3.3 3.1 1.7 1.7 99.21 80.87 Source: SSI Research www.samuel.co.id Page 2 of 4 Aneka Tambang Bloomberg: ANTM.IJ | Reuters: ANTM.JK Metal Mining Sector 16 February 2021 JCI Index: 5,310 Key Financial Figures Profit and Loss Cash Flow Y/E Dec (IDR Bn) 18A 19A 20F 21F 22F Y/E Dec (IDR Bn) 18A 19A 20F 21F 22F Revenue 25,275 32,719 26,108 29,660 33,811 Net Profit 1,636 194 1,501 2,462 3,142 Cost of Revenue (20,613) (28,271) (22,560) (24,860) (27,489) D&A 844 1,110 1,007 934 851 Gross Profit 4,662 4,447 3,549 4,800 6,322 Changes in Working Capital (605) 330 550 576 1,098 Operating Expense (3,106) (3,492) (1,393) (1,602) (2,426) Operating CF 1,875 1,634 3,058 3,972 5,092 Operating Profit 1,556 956 2,156 3,199 3,896 EBITDA 2,400 2,066 3,163 4,133 4,747 Capital Expenditure (2,138) (1,137) (908) (1,254) (1,430) EBITDA Margin (%) 9.5 6.3 12.1 13.9 14.0 Others (456) 252 - - - Finance Income 261 120 171 230 325 Investing CF (2,594) (885) (908) (1,254) (1,430) Finance Expense (1,130) (233) (210) (229) (193) Share of associates and JV (1,260) (88) (199) (295) (359) Dividend Paid (48) (306) (68) (525) (862) Gain On Acquisition 2,226 - - - - Net Borrowing (572) (1,057) (240) 754 (1,455) Forex Gain (Loss) 276 (236) (295) (311) (326) Financing CF (620) (1,363) (308) 228 (2,317) Other Income, net 84 168 379 563 686 Pre-tax Profit 2,013 687 2,002 3,156 4,029 Net - Cash flow (1,339) (615) 1,843 2,946 1,345 Taxes (377) (493) (500) (694) (886) Forex Gain/(Loss) 87 (48) (60) (64) (67) Minority Interest (0.0) (0.0) (0.0) (0.0) (0.0) Cash at Beginning 5,551 4,299 3,636 5,419 8,301 Net Profit 1,636 194 1,501 2,462 3,142 Cash at Ending 4,299 3,636 5,419 8,301 9,579 Balance Sheet Key Ratios Y/E Dec (IDR Bn) 18A 19A 20F 21F 22F Y/E Dec 18A 19A 20F 21F 22F Cash 4,299 3,636 5,419 8,301 9,579 Gross Profit Margin (%) 18.4 13.6 13.6 16.2 18.7 Receivables 995 1,431 1,426 1,382 1,646 Operating Margin (%) 6.2 2.9 8.3 10.8 11.5 Inventory 1,846 1,796 2,061 2,058 2,192 Pretax Margin (%) 8.0 2.1 7.7 10.6 11.9 Others 203 802 670 775 884 Net Profit Margin (%) 6.5 0.6 5.8 8.3 9.3 Total Current Asset 7,342 7,665 9,576 12,516 14,302 Revenue Growth (%) 99.7 29.4 (20.2) 13.6 14.0 Net Fixed Asset 19,490 18,866 18,018 16,712 15,224 EBITDA Growth (%) 67.7 (13.9) 53.1 30.7 14.9 Other Assets 5,364 3,664 8,740 12,825 15,792 Debt to Equity (x) 0.7 0.7 0.9 1.0 1.0 Total Asset 32,195 30,195 36,333 42,053 45,317 Payables 868 740 1,089 1,116 1,650 Major Assumptions ST.