IP METALS - 09 Mar 2021

Metals & Mining (Nickel) OVERWEIGHT
Sector Initiation | 09 March 2021
Sector Index Performance (JAKMINE)

3M 6M 12M
Riding the wave of the new economy,
Absolute 1.5% 28.2% 43.2% initiate coverage with OW rating
Relative to JCI -3.0% 9.7% 22.5%
 Global nickel demand is expected to grow by 3-7% CAGR FY20-30F,
20% with demand from EV batteries as the main driver (+34-46% CAGR).
15%  Shift to nickel-rich cathode is inevitable amid initiatives to improve EV
10% mileage and lowering overall cost, creating demand windfall.
5%
 Indonesia is set to benefit from growing NPI/stainless steel production
0%
and battery/EV supply chain initiatives. Initiate with Overweight rating.
-5%
A proxy of the new economy
-10%
Global nickel demand is expected to grow by 3-7% CAGR FY20-30F despite
tepid traditional demand from stainless steel (+1% CAGR FY20-30F) and
JCI Index JAKMINE Index plating/ferrous alloys (-1% CAGR FY20-30F); pick-up in nickel demand shall
primarily come from EV battery manufacturing (+34-46% CAGR FY20-30F)
Summary Valuation Metrics amidst exponential increase in demand for electric vehicles/EV (20-30x in
FY20-30F), in-line with the growing urgency for major countries to lower
P/E (x) 2020F 2021F 2022F
carbon output and meeting its respective emission target.
ANTM IJ 43.9 17.1 10.5
INCO IJ 37.9 19.5 17.8 Additional windfall from technology shift towards nickel rich specs
A technological shift towards higher nickel content cathode material such as
P/BV (x) 2020F 2021F 2022F NMC 811 (80% nickel) is imminent as: 1) nickel’s higher energy density
ANTM IJ 2.8 2.4 2.1 (crucial to improve EV mileage), and 2) significantly more efficient costs
INCO IJ 1.5 1.4 1.3 (assuming similar nickel/cobalt price assumptions, per Kwh battery cost for
NMC 811 will be 40% lower than NMC 522 – Fig 28). Coupled with a severe
Div. Yield 2020F 2021F 2022F scarcity for other key minerals (such as cobalt – Fig 25), we believe this shall
ANTM IJ 0.1% 0.8% 2.0% create additional windfall for nickel demand in the medium-to-long term.
INCO IJ 0.0% 0.0% 0.0%
Indonesia shall be the prime beneficiary
Indonesia is the largest nickel player in the world, accounting for 30/40% of
global production/resources as of FY20. ESDM expects Indonesia’s nickel
production output to triple in the next 10 years driven by demand from
NPI/stainless steel production (+10% CAGR FY20-30F) and EV/battery
supply chain initiated by the Indonesia Battery Corporation/IBC (+16% CAGR
FY20-30F). We think ANTM will be the main beneficiary of the latter, as it has
been designated to spearhead the mining/refining activities for the supply
chain, which shall enable it to monetize its massive nickel resource base.
Initiate with Overweight; ANTM is our top pick
Our analysis suggests that Indonesia’s listed nickel players’ EV/resource
valuation of US$3-7/wmt are well undervalued vs. global peers’ average of
US$13/wmt. We think this is unjustified amid Indonesia’s significantly lower
cost base, resource expansion potential (significant portion of permitted
concession area are still unexplored), and massive production/processing
capacity expansion the medium/long term. Initiate with an OW rating with
Timothy Handerson ANTM as our top pick. Risk to our thesis is unexpected supply
PT Indo Premier Sekuritas increase/demand drop, which could adversely impact nickel prices.
timothy.handerson@ipc.co.id Fig. 1: We expect global nickel demand to grow 3-7% CAGR FY20-30F
+62 21 5088 7168 ext. 714 % of % of
Nickel dem and by type (k tonnes) FY19 FY30F CAGR
total total
Stainless steel 1,827 70.0% 2,038 43.9% 1.0%
Anthony Plating and other alloys 626 24.0% 561 12.1% -1.0%
PT Indo Premier Sekuritas
Batteries 65 2.5% 1,940 41.8% 45.8%
Others 92 3.5% 101 2.2% 1.0%
anthony@ipc.co.id Total 2,610 100.0% 4,641 100.0% 6.6%
+62 21 5088 7168 ext. 715 Source: IEA, Ministry of Energy and Mineral Resources, Indo Premier
Refer to Important disclosures in the last page of this report

09 March 2021
Sector Initiation
Metals & Mining (Nickel)
Nickel demand is set to grow by 3-7% CAGR FY20-30F

Global nickel consumption is expected to grow by a CAGR of 3-7% in the
next 10-20 years (+3% CAGR in FY20-40F by Minerba, +4-7% CAGR FY20-
30F by IEA). While growth from stainless steel production (+1% CAGR
FY20-30F; 70% of global nickel consumption in FY20) and plating/ferrous
alloys (-1% CAGR FY20-30F; 27% of global nickel consumption in FY20) are
expected to be relatively muted in the coming years, demand from battery
production (+34-46% CAGR FY20-30F) shall be the new source of growth on
the back of an expected exponential increase in EV demand going forward.
Fig. 2: Ministry of Energy and Mineral Resources expects nickel demand to grow 3%
CAGR FY20-40F
Nickel dem and by FY20-40F
2020 % of total 2040F % of total
segm ent (k tonnes) CAGR
Stainless steel 1,704 71% 1,920 48% 1%
Non-ferrous alloys 240 10% 400 10% 3%
Plating 168 7% 200 5% 1%
Foundry 96 4% 160 4% 3%
Alloy steels 120 5% 120 3% 0%
Batteries 72 3% 1,200 30% 15%
Total 2,400 100% 4,000 100% 3%
Source: Ministry of Energy and Mineral Resources, Indo Premier
Fig. 3: IEA expects nickel demand to grow 4-7% CAGR FY19-30

Base case - IEA
% of % of
total total
Stainless steel 1,827 70.0% 2,038 56.1% 1.0%
Plating and other alloys 626 24.0% 561 15.4% -1.0%
Batteries 65 2.5% 932 25.7% 34.4%
Others 92 3.5% 101 2.8% 1.0%
Total 2,610 100.0% 3,632 100.0% 3.7%
Bull case - IEA

% of % of
total total
Stainless steel 1,827 70.0% 2,038 43.9% 1.0%
Plating and other alloys 626 24.0% 561 12.1% -1.0%
Batteries 65 2.5% 1,940 41.8% 45.8%
Others 92 3.5% 101 2.2% 1.0%
Total 2,610 100.0% 4,641 100.0% 6.6%
Source: IEA, Indo Premier
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09 March 2021
Sector Initiation
Muted nickel demand from stainless steel….

Stainless steel manufacturing accounts for 70% of global nickel consumption
as of FY20, and is expected to grow by only 1% CAGR FY19-30F.
Geographically, China is the main driver of global stainless steel production,
accounting for 60% of global production as of FY20 driven by 1) significant
recovery in its manufacturing activities post Covid, and 2) continuous growth
in infrastructure/property development (Fig 6-7 shows the positive correlation
between the stainless steel production vs. China’s infrastructure
investment/completed floor space).
While the rate of growth of stainless steel production is expected to normalize
going forward, we believe that stainless steel will continue to account for
majority of global nickel consumption (44-56% of global nickel consumption
by FY30F).
Fig. 4: Stainless steel production by country (in m tonnes) Fig. 5: Stainless steel production by country/region (% of total)
60 100%
Thousands
51 52
90% 20% 19% 19% 17% 24% 26%
48 49 27% 26% 25% 23% 24% 23%
50 46 80% 36% 32% 33%
12 7% 7% 6%
42 42 13 11 7% 6% 6% 6% 5% 4%
40 36
39 8 12 70% 8% 8% 7%
34 8 8 3 9% 9% 24% 22% 23% 22% 17% 16% 15% 13%
31 3 3 3 2 60% 10%
29 28 8
8
3 3 8 6 26% 26%
30 26 8 2 10 8 8 50% 30% 29%
25 8 2 9 9 33% 32%
10 9 2 9 40%
20 9 7 3 9 35%
3 3 2 9 30% 56% 60%
2 9 29 29 49% 52% 52% 54% 54% 52%
9 8 7 25 26 27 20% 42% 45%
10 10 19 22 22 35% 36%
14 16 10% 26% 26%
9 11 18%
5 7 7
0 0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
China Asia ex China Americas Others World China Asia ex China Americas Others
Source: Euromonitor Source: Euromonitor
Fig. 6: China stainless steel production vs. infrastructure Fig. 7: China stainless steel production vs. completed floor space
investment
80% 50% 80% 30.0%
70% 70% 25.0%
40%
60% 60% 20.0%
50%
50% 30% 15.0%
40%
40% 10.0%
20% 30%
30% 5.0%
20%
20% 10% 0.0%
10%
10% 0% -5.0%
0%
0% -10% -10.0%
-10% -10% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 China stainless steel production yoy%
China stainless steel production yoy% China infrastructure investment yoy% China residential floor space completed yoy%
Source: Bloomberg, Euromonitor Source: Bloomberg, Euromonitor
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09 March 2021
Sector Initiation
… as well as plating/ferrous alloys

Plating/ferrous alloys manufacturing accounts for 27% of global nickel
consumption as of FY20, though growth from this segment is expected to
remain muted in the medium-long term (-1% CAGR FY20-30F). Note that
majority of plating/ferrous alloys manufactured (60-70%) are used for
airplane construction; as recovery in the travel sector shall be contingent on
better vaccination progress and most likely to be delayed, we expect
recovery in airplane production and subsequently demand for plating/ferrous
alloy production to remain relatively muted as well.
Fig. 9: Global annual domestic and outbound travel revenues (US$

Fig. 8: Aircraft delivery is expected to see a gradual recovery –
bn) – higher airplane deliveries will be contingent on a recovery in
relatively muted growth in the next 10 years
the travel industry, which most likely shall be delayed due to Covid
Source: McKinsey Source: Bloomberg
Battery manufacturing is the new nickel demand driver

Concurrently, nickel consumption for battery manufacturing is expected to
grow 34-46% CAGR FY20-30F, in-line with the growing demand for electric
vehicles. Various sources such as Bloomberg, IEA, and analysis conducted
by Ministry of Energy and Mineral Resources expect EV sales to increase by
20-30x in the next 10 years, in-line with growing ESG concerns and global
countries’ goal to reduce carbon output and meet long-term emission target.
Indeed, we have seen stronger signs of EV adoption with FY20 global EV
sales volume growth picking-up to 74% yoy during the pandemic year, while
non-EV sales volume was down 25% yoy. In FY20, Norway also became the
first country in the world to see EV sales volume outpace non-EV sales
volume.
Fig. 10: Global EV sales is expected to grow 19x by 2030 – this translates to cumulative
lithium battery demand of 3,563 GWh
Source: Ministry of Energy and Mineral Resources, IEA, Bloomberg, Indo Premier
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09 March 2021
Sector Initiation
Fig. 11: Europe auto sales breakdown – gap between EV sales Fig. 12: EV sales market share in Europe jumped to 11% in FY20 vs.
growth and non-EV sales growth widened significantly in FY20 5% in FY19
140% 100%
118%
120% 90%
100% 80%
74% 70%
80%
60%
60% 49% 89%
50% 98% 97% 96% 95%
40% 28% 29%
40%
20%
3% 3% 30%
0% 20%
-1% -1%
-20% 10%
5% 11%
-40% -25% 0% 2% 3% 4%
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Europe EV sales yoy% Europe non-EV sales yoy% Europe EV sales as % of total Europe non-EV sales as % of total
Source: MarkLines, Indo Premier Source: MarkLines, Indo Premier
China is one of the key players in the EV segment with total sales volume of
1.1m units (50% global market share), followed by Europe at 560k units
(27% global market share) and US at 330k units (16% global market share).
Despite its dominance in the ICE space, Japan only recorded 39k units of EV
sales FY19 (2% global market share).
Going forward, IEA expects China to remain as the main driver of EV sales
growth (+31-33% CAGR FY19-30F; 30-50% market share by FY30F),
followed by Europe (+29-35% CAGR FY19-30F; 18-22% market share by
FY30F) and US (+19-37% CAGR FY19-30F; 6-12% market share by
FY30F); Japan is expected to see a faster growth rate in EV sales volume
(+45-55 CAGR FY19-30F) amid a lower base, though its global market share
is expected to remain small 4%. India shall become one of the new key
players as EV sales volume is projected to grow by 110-132% CAGR FY19-
30F and will increase its global market share from 7-9% by FY30F vs. 0.1%
in FY19.
We believe that the EV adoption shall also be accelerated by aggressive
targets/commitments set by traditional auto manufacturers, especially from
Europe (e.g. Volkswagen), US (e.g. Ford/GM), as well as Japan (e.g.
Toyota/Honda/Nissan) – Fig 15.
Fig. 13: EV sales breakdown by region – growth shall be driven by Fig. 14: EV sales market share by region – China is expected to have
China, Europe, US, and India the largest market share by FY30F, followed by EU/US/India
60.00 100% 5%
0.1%
2% 11% 11% 16%
90% 26%
50.00 46.3 16% 8% 7%
80% 4% 4% 10%
5% 6% 5%
40.00 12.1 70% 9%
27% 6% 4%
60% 22% 22%
4.1 22% 12%
30.00 24.7 24.5 2.0 50%
2.7 5.7 40% 18%
1.6 4.0
20.00 13.5 1.1
1.6 2.4 8.5 30%
1.2
1.5
5.4 50% 50% 50%
1.5
1.1
0.6 5.5 20% 41%
10.00 0.7
2.9 30%
2.1 12.3 10.0 13.9 10%
6.8
0.00 0%
2019 2025 - Stated 2030 - Stated 2025 - Sustainable2030 - Sustainable 2019 2025 - Stated 2030 - Stated 2025 - Sustainable2030 - Sustainable
Policies Scenario Policies Scenario Development Development Policies Scenario Policies Scenario Development Development
Scenario Scenario Scenario Scenario
China Europe US Japan India Others Total China Europe US Japan India Others
Source: IEA, Indo Premier Source: IEA, Indo Premier
Page 5 of 42
09 March 2021
Sector Initiation
Fig. 15: Major global auto manufacturers have expressed their commitments/targets to achieve higher trajectory of EV sales in the
medium/long term
Global Sales
No Com pany Ow ner Origin Target
in 2019 (m n)
1 General Motors General Motors US 7.7 Aims for 5mn EV sales by 2030
Will offer 40 electric and electrified vehicles in 2022 model lineup, triple
2 Ford Ford US 5.4
EV offfering by 2025
Aims to have EVs and hybrids comprise tw o-thirds of its vehicles sold
3 Honda Honda Japan 5.3
w orldw ide by 2030
Electrified vehicles w ill account for 60% of its sales in Japan, 23% in
4 Nissan Nissan Japan 4.9
China and 50% in Europe by 2023
Expects to sell 5.5mn electric and hybrid cars by 2025; 4.5mn of hybrid
5 Toyota Toyota Japan 10.7
and plug-in hybrids and 1mn from electric and hydrogen fuel-cell
6 Audi Volksw agen Europe 1.2 Aims to increase its proportion of EV to 33% by 2025
Aims to have more than 7mn EV across its brands in 10 years, w ith
7 BMW BMW Europe 2.2
about 4.6mn being all electric
8 Mercedes Benz Daimler Europe 2.3 Aims to have EV accounts for 50% of its sales in 2030
Aims for battery-electric vehicles to make up 40% of its global fleet by
9 Volksw agen Volksw agen Europe 4.1
2030
Aims to generate 50% of its global sales from EVs by 2025, w ith the rest
10 Volvo Geely Europe 0.7
hybrids
11 SAIC Motor SAIC Corp China 6.2 Aims to raise 2025 electrified-car sales target to about 25%
12 FAW FAW Group China 3.5 Aims to launch 15 all-electric models by 2025
13 Dongfeng China Govt China 2.9 Aims EV to account for 30% of its sales in 2022
14 GAC Group GAI Group China 2.1 Aims EVs to contribute 10% of its annual sales from 2020
Changan Jiangling Motors Aims to produce 34 NEVs by 2025' Aims to stop selling ICE vehicles and
15 China 1.8
Automobile Corp realize complete electrification on all products by 2025
It aims to sell 2mn vehicles annually and have 90% of it to electrify by
16 Geely Geely China 0.7
2020, 65% w ould be hybrid and 35% w ould be pure EVs
Source: Various, Indo Premier
Data by ClimateTracker shows that most major economies are 1) planning to

lower carbon emission by 20-60% in the next 5-10 years, and 2) most of
countries with the largest emission contributors have insufficient measures to
meet their medium-to-long term emission target (Fig 16). By sector,
manufacturing (24%), building construction (18%) and transportation (16%)
are the biggest contributor to global emission – higher adoption of electric
vehicles in lieu of conventional internal combustion engine (ICE) vehicles can
significantly reduce emission from transport and manufacturing sectors.
Fig 18 shows that over the first 12 years of its lifespan, the cumulative CO2
emissions for EVs are 75-80% lower vs. ICEs, despite the higher emission
during manufacturing stage.
Page 6 of 42
09 March 2021
Sector Initiation
Fig. 16: Summary of global emission and reduction target

Country in GT % of total Em ission target Em ission target rating
China 10.1 28% 60-65% reduction by 2030 vs. 2005 Highly insufficient
United States 5.4 15% 26-28% reduction by 2025 vs. 2005 Critically insufficent
India 2.7 7% 20-25% reduction by 2020 vs. 2005 level Compatible
Russian Federation 1.7 5% At least 40% reduction by 2030 from 1990 level Critically insufficent
Japan 1.1 3% 26% reduction by 2030 vs. 2013 level Highly insufficient
Germany 0.8 2% 55% reduction by 2030 vs. 1990 level Insufficient
Iran 0.7 2% 4-12% reduction by 2030 N/A
South Korea 0.7 2% 37% reduction by 2030 vs. BAU Highly insufficient
Saudi Arabia 0.6 2% Reduce emissions by 130 MtCO2e below BAU by 2030 Critically insufficent
Indonesia 0.6 2% 29-41% reduction below BAU by 2030 Highly insufficient
Rest of the w orld 11.6 32%
Total 35.9 100%
Source: Climate Tracker, Indo Premier
Fig. 17: Global emission by sector – energy (73%) accounts for majority of global carbon
emission, main driven by manufacturing (24%) and transport (16%)
5%
3%
24%
Energy - manufacturing
18%
Energy - building
Energy - transportation
Energy - others
Agriculture/forestry/land use
18% Waste
15%
Industry
16%
Source: WorldInData
Fig. 19: CO2 emission comparison between EVs and ICEs during
Fig. 18: Cumulative CO2 emission of EVs vs. ICEs different stages – EV has higher emission during manufacturing but
lower emission during usage
45 41 60% 120%
Cumulative emission (tonnes CI2)
40 38
35 40%
35 32 100%
30 23%
20%
30 27
24 80%
25 21 0%
20 18
15 -20% 60%
13 13 13 13 13 77%
15 11 11 11 11 12 12 12
10 1010 -40%
10 7 40% 83%
5 -60%
20%
0 -80%
0 1 2 3 4 5 6 7 8 9 10 11 12 17%
0%
Years
Emission from manufacturing activity Emission from usage
Conventional vehicles EV Difference in lifetime carbon emission Conventional vehicles EV
Source: Carbon Brief Source: Carbon Brief
Page 7 of 42
09 March 2021
Sector Initiation
The role of battery specifically in the EV supply chain is a crucial one, as it is

1) the key differentiator vs. conventional cars in terms of manufacturing
process (i.e. as they replace engines in a conventional car), and 2) dictates
the overall pricing of the EV (as battery constitutes 35-40% of EV’s total cost
currently). In response to expected exponential increase in EV volume, the
top 11 battery manufacturers have also expressed its commitment to expand
battery manufacturing capacity by 18% in FY18-28.
Battery manufacturing consists of several components, such as cathode,
anode, separators, and electrolytes. Cathode is one of the most critical, partly
due to the limited availability of key minerals required. Previously, some of
the most prominent cathode production used specifications such as NCA
(Nickel, Cobalt, Aluminium) or the NMC 111 specification (i.e. 33% nickel,
33% manganese, and 33% cobalt). However, this created several key
bottleneck issues:
1) High cobalt content requirement creates a bottleneck amid extremely
scarce cobalt minerals. Fig 25 shows that global cobalt reserves may be
depleted as early as FY30-40F, which could result in either steep
increase in raw material cost or inadequate raw materials to
accommodate the robust demand.
2) The low nickel content translates to a low energy density, which means
that a larger (and consequently heavier) battery pack would be required
to power the EV. This effectively caps the battery capacity at a smaller
capacity number (as too big/heavy of a battery pack might not fit in most
designs and could alter the car’s centre of gravity) and concurrently
limiting the EV’s maximum mileage (i.e. lower battery capacity = lower
distance travelled = higher charging frequencies).
Fig. 20: Lithium ion battery capacity demand shall grow 15% CAGR Fig. 21: Lithium ion battery demand breakdown – majority of the
FY20-30F incremental demand shall be driven for mobility (EV)
1,000 100% 3% 4% 4% 5% 5% 5% 4% 4% 3% 3% 3%
900 90% 17% 14% 14% 13%
778 25% 24% 21% 19%
800 80% 31% 29% 27%
672
700 101 70%
577
600 91 60%
500 436 82 50%
400 345 40% 79% 82% 83% 84%
74 70% 71% 74% 76%
280 650 65% 67% 69%
300 230 67 558 30%
167 195 60 475
200 124 144 55 20%
49 345
42 45 263
100 39 164 207 10%
81 96 115 137
0 0%
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Mobility Stationary Consumer Mobility Stationary Consumer
Source: Ministry of Energy and Mineral Resources, Indo Premier Source: Ministry of Energy and Mineral Resources, Indo Premier
Page 8 of 42
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Fig. 22: Breakdown of EV cost – battery accounts for 35-40% of total Fig. 23: Battery cost by producer country – Indonesia is expected to
EV costs be the lowest cost battery producer
100% 150
90%
80% 130 118 117 115
109
70% 50% 110
60% 34 34 33
84% 90 31
50%
40% 4% 70
30%
14% 50
20% 84 83 82 78
10% 15% 16% 30
0%
10
Electric vehicles Conventional vehicles
Electricmotor/other electronics Battery pack - nicckel (10)
Battery pack - non-nickel ICE powertrain China South Korea Thailand Indonesia
Other costs Cell cost Pack cost (excluding cell cost)
Fig. 24: Top 11 global battery producers manufacturing capacity is projected to grow by a
CAGR of 18% in FY18-28
FY28 battery
FY18 battery
production FY18-28
Com pany Country production
capacity target CAGR
capacity (GWH)
(GWH)
CATL China 40 307 25%
LG Chem South Korea 50 237 19%
Tesla United States 46 135 13%
BYD China 40 112 12%
Samsung South Korea 30 94 14%
SVOIT China 12 79 23%
Panasonic Japan 35 77 9%
A123 South Korea 2 72 49%
Northvolt Europe 0 64 N/A
Farasis China 23 62 12%
SK Innovations South Korea 8 54 24%
Top 11 total 286 1293 18%
Fig. 25: The increasing scarcity as one of the traditional battery cathode components is
another supporting factor to shift towards other minerals, such as nickel
Source: Massif Capital, Indo Premier
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Due to these issues, coupled with technological advancement, most battery

producers are gradually shifting towards nickel-rich specifications (e.g. NMC
523, NMC 622 and eventually NMC 811, which translates to 50/60/80%
nickel content, 20/20/10% manganese, and 30/20/10% cobalt, respectively).
Indeed, Fig 29 also shows that most major battery manufacturers are
planning to gradually shift towards NMC in the next 10 years, while BNEF
expects 88% of global battery production to adopt NMC 811 specifications by
FY30F (Fig 27).
The need to lower battery costs is also a compelling reason for
manufacturers to shift to higher nickel specifications such as NMC 811. While
battery costs have come down significantly in the past few years (Fig 26), the
overall pricing for EVs are still generally >30% higher vs. conventional cars.
Lower battery cost is imperative to improve the competitiveness of EV prices
vs. ICEs. Various sources such as Tesla and Statista expect that continuous
advancement of technologies could bring battery cost (in US$/kwh) by
another 30-35% lower in the next 5-6 years, which shall improve the price
parity between EV and normal cars).
The adoption of higher nickel content in battery cathode manufacturing shall
have a direct correlation in bringing the cost of batteries down; Fig 28 shows
the sensitivity of battery cost (in US$/kwh terms) assuming different
nickel/cobalt prices, where NMC 811 costs are 40% lower vs. NMC 622
specifications.
Fig. 26: Cost of EV battery has improved by 20% CAGR FY10-19, and is expected to
decline by another 9% CAGR FY19-24F
1400
1200 1160
1000
899
800 707
650
577
600
373
400
288
214
176 156
200
100
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2024
Cost per Kwh
Source: Statista
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Fig. 27: Avicenne Energy/BNEF expects a significant shift towards Fig. 28: Shift to nickel rich battery is imperative to further lower
nickel-rich batteries in the next 10 years battery cost and thus overall EV cost
100% Cobalt price (US$/lb)
3%
12% 17% NMC 622 15 25 40
90% 19% 5,000 196 205 213
80% Nick e l price
23% 10,000 201 208 216
70% (US$/tonne )
36% 14,600 206 213 223
60% 35%
88%
50% Cobalt price (US$/lb)
40% 56%
NMC 811 15 25 40
30% 5,000 121 123 126
37% Nick e l price
20% 43% 10,000 124 126 129
(US$/tonne )
14,600 127 129 132
10%
9% 10% 12%
0%
Cobalt price (US$/lb)
Avicenne Energy BNEF Avicenne Energy BNEF
Diffe re nce 15 25 40
2020 2030 5,000 -38% -40% -41%
Nick e l price
10,000 -38% -39% -40%
NMC-111 NMC-532 NMC-622 NMC-811 (US$/tonne )
14,600 -38% -39% -41%
Source: Bloomberg, Indo Premier Source: Massif Capital, Indo Premier
Fig. 29: Most major battery producers are also gradually shifting towards nickel rich
battery manufacturing such as NMC 811 in the next 10 years
Source: Roskill, Indo Premier
Despite Tesla’s recent aspiration to migrate from nickel-based battery

cathode towards iron-cathode (i.e. LFP), which may provide a low-cost
alternative (cell cost excluding packing cost as low as US$80kwh vs.
US$100-120/kwh for NMC), various evidences suggest that a massive
transition towards LFP seems unlikely at the moment.
The significantly lower energy density for LFP (30-35% lower vs. NMC)
makes it only suitable for limited used cases in the EV space, particularly
small/city passenger cars (i.e. <200 miles per charge vs. ICE average of 400
miles per fuel tank). Increasing the mileage using a bigger LFP battery could
add significant weight to the EV and potentially require alterations to the EVs’
design as a whole.
Concurrently, LFP consumption might be better suited energy storage
systems (ESS), which is favourable amid LFP’s much more stable nature of
its chemistry and also long life-cycle (i.e. much less likely to overheat/explode
vs. its NMC counterpart), though we do acknowledge the potentially growing
LFP uses for EV in the long run amid its attractive features (i.e. low cost,
stable, ample availability of raw materials), but this shall be heavily
dependent on progress on design/technological advancements.
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Sector Initiation
Fig. 30: Chemical characteristics of various cathode materials – its low energy density
and high safety score makes LFP relatively unsuitable for EV and suitable for ESS
Source: MDPI, Indo Premier
Nonetheless, the major battery manufacturers’ commitment to expand nickel-

based manufacturing capacity and shift to higher nickel-content (Fig 29)
provides empirical evidence of the overwhelming advantages and
compatibility of nickel-rich batteries for EV uses currently, in our view. So far,
only CATL has expressed interest to aggressively grow in the LFP (only
China uses LFP for its EV manufacturing – Fig 31-32), though this is in-line
with its previous aspiration to increase its exposure to the ESS segment.
On top of this, we also note that some of the major manufacturers such as
LG Chem and Panasonic hold various patents on nickel-based battery
products, which makes an abrupt transition to LFP unlikely, in our view.
Fig. 31: China battery capacity demand by chemistry – proportion of Fig. 32: Rest of the world battery capacity demand by chemistry –
LFP-based battery peaked at 44% of total in FY17 and dropped to no LFP battery use outside of China; NMC-based batteries
10% in FY20 dominated at 59%/74% of total as of FY17/20, respectively
100% 1% 2% 2% 1%
2% 100%
10% 6% 14%
90% 2% 90% 24%
26% 1%
15% 17% 33%
80% 44% 39% 80%
2% 1%
2%
70% 70%
37%
60% 60% 8%
4% 8% 32% 35%
50% 12% 50%
40% 26% 40%
73% 72% 30% 25%
30% 30%
20% 45% 20% 40% 38%
10% 26% 10% 21% 23%
0% 0%
2017 2020 2025 2030 2017 2020 2025 2030
NMC 111 NMC 622 NMC 811 NMC 9.5.5 LMO LFP NCA NMC 111 NMC 622 NMC 811 NMC 9.5.5 LMO LFP NCA
Source: McKinsey, Indo Premier Source: McKinsey, Indo Premier
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Fundamentals points to robust price trend in the short/medium term

The LME nickel price recently dropped from peak of US$19.6k/tonne on
Feb21 to US$16.3k/tonne as of today, amid pressure from 1) expectation of
higher nickel supply (i.e. nickel matte supply by Tsingshan and recovery from
Norilsk production), and 2) strengthening US$, which puts pressure on
overall commodity prices.
Our discussion with major nickel players in Indonesia suggest that the
correction should be more temporary than structural, as they still expect
medium-term nickel prices to remain robust at US$17-19k/tonne. We
highlight that Tsingshan’s deal with Huayou to increase nickel matte supply
might ease supply for battery grade nickel, the overall nickel market is
expected to remain in deficit in the short/medium term, which shall support
prices, in our view.
The global nickel market has consistently saw a supply deficit every year
since FY13, with the deficit peaking at 304k tonnes in FY18 before
normalizing slightly to 100k tonnes in FY20 which we attribute towards the
4% yoy drop in demand during Covid pandemic.
Wood Mackenzie expects the global nickel production to remain muted in the
medium/long term (flat to +1% CAGR FY20-30F) as growing production from
Indonesia shall be offset by lower production from China (as essentially the
Chinese production is shifting to Indonesia). Putting in our base case
demand expectations of 3-7% CAGR FY20-30F, we believe that the global
nickel supply deficit may widen to 300-400k tonnes by FY23. We believe this
shall be supportive towards overall nickel prices – Fig 34 shows the strong
correlation between nickel prices and global surplus/deficit.
Inventory levels are also highly correlated with prices, as shown in Fig 36-37;
while overall nickel inventory levels have somewhat improved vs. the recent
low in 2019, inventory levels as of Feb21 remains at 20% below the 5-year
average. Coupled with recovery in overall demand (as indicated by higher
cancelled warrants at 26% of total warehouse stocks as of Feb21 vs. 17% in
Dec19, which indicates an increase in physical nickel deliveries from the
warehouse stock), we believe this shall also support short-term prices.
Currently, LME nickel prices stood at US$16.3k/tonne (+18% yoy)
Fig. 33: Global supply and demand outlook - the nickel market has consistently seen a supply deficit in recent years
Global nickel supply dem and (k tonnes) 2012 2013 2014 2015 2016 2017 2018 2019 2020
Nickel supply mined (k tonnes) 2,246 2,457 1,997 1,999 1,856 2,047 2,259 2,477 2,204
yoy% 9% -19% 0% -7% 10% 10% 10% -11%
Refined nickel production (k tonnes) 1,777 1,929 1,871 1,867 1,912 2,066 2,245 2,395 2,408
yoy% 9% -3% 0% 2% 8% 9% 7% 1%
Refined nickel consumption (k tonnes) 1,676 1,972 1,893 2,033 2,169 2,344 2,549 2,622 2,508
yoy% 18% -4% 7% 7% 8% 9% 3% -4%
Refined nickel surplus/(deficit) - in k tonnes 101 (42) (22) (165) (257) (278) (304) (227) (99)
yoy% -142% -48% 655% 56% 8% 10% -25% -56%
LME nickel inventory (end of period) - k tonnes 114 201 324 441 394 379 271 152 233
yoy% 76% 61% 36% -11% -4% -29% -44% 54%
Average LME nickel price (US$/tonne) 17,499 14,848 16,731 11,489 9,562 10,505 13,078 14,161 13,734
yoy% -15% 13% -31% -17% 10% 24% 8% -3%
Source: Bloomberg, Indo Premier
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Fig. 34: Nickel price yoy vs. global surplus/(deficit) – strong Fig. 35: Higher cancelled LME warrants (i.e. higher number of actual
negative correlation deliveries) are supportive of higher nickel prices
0 30% 80% 60%
(50) 20% 60% 50%
(100) 10% 40%

40%
20%
(150) 0% 30%
0%
(200) -10%
20%
-20%
(250) -20%
-40% 10%
(300) -30%
-60% 0%
Jan-15
Jan-19
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jul-19
Jan-20
Jul-20
Jan-21
(350) -40%
2013 2014 2015 2016 2017 2018 2019 2020
Refined nickel surplus/(deficit) - k tonnes LME nickel price yoy% (RHS) LME nickel price yoy% LME cancelled warrants 3MMA - RHS
Source: Bloomberg, Indo Premier Source: Bloomberg, Indo Premier
Fig. 36: LME nickel price yoy vs. nickel warehouse stock (k tonnes) Fig. 37: LME nickel price yoy vs. nickel warehouse stock yoy% -
– strong negative correlation between price and warehouse stocks strong negative correlation between price and change in stock
500 80% 80% 300%
450 250%
60% 60%
400
200%
350 40% 40%
300 150%
20% 20%
250 100%
200 0% 0%
50%
150 -20% -20%
0%
100
-40% -40% -50%
50
0 -60% -60% -100%
Jan-16
Jan-11
Jul-20
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jan-21
Jan-11
Jul-18
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Nickel warehouse stock (k tonnes) LME nickel price yoy% (RHS) LME nickel price yoy% Nickel warehouse stock yoy% (RHS)
Indonesia nickel: a vital supplier on a global scale

The robust nickel demand outlook elevates Indonesia’s importance as the
world’s biggest nickel supplier. As of FY20, Indonesia commands 40% of
global resources, head and shoulders above the next biggest player Australia
at 10% of global resources. While the nature of Indonesia’s laterite deposits
tends to lean towards consumption for steel industry, the advancement of
technology in recent years, coupled with Indonesia government’s initiatives
should enable it to capitalize on the growing demand for battery
manufacturing as well (which traditionally has been sourced using sulphide
ores – more details in the Indonesia Battery Holding section).
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Fig. 38: Breakdown of global nickel resources – Indonesia has the largest nickel
resources globally, accounting for 40% of global resources
Nickel m etal resources (in m as % of

Sulphide Laterite Total
tonnes) totall
Indonesia 0.0 175.0 175.0 40%

Australia 11.9 31.5 43.4 10%
South Africa 33.2 0.0 33.2 8%
Russia 20.5 4.0 24.4 6%
Canada 21.9 0.0 21.9 5%
Philippines 0.0 18.0 18.0 4%
Brazil 1.6 14.8 16.4 4%
Cuba 0.0 16.2 16.2 4%
New Caledonia 0.0 15.0 15.0 3%
China 6.0 0.0 6.0 1%
Other countries 22.5 45.3 67.8 16%
Total 117.6 319.9 437.4 100%
Source: KCMI, Indo Premier
Fig. 39: Breakdown of global nickel resources – majority of Indonesia’s nickel deposits
are located in Southeast Sulawesi, North Maluku, and Central Sulawesi
Indoensia nickel
Ore Metal Im plied
resource % of % of
resources resources blended NI
breakdow n by total total
(m tonnes) (m tonnes) grade(%)
location
Southeast Sulaw esi 4,471 38% 72 41% 1.6%
North Maluku 3,569 30% 48 27% 1.3%
Central Sulaw esi 2,309 20% 36 21% 1.6%
South Sulaw esi 506 4% 5 3% 0.9%
West Papua 435 4% 7 4% 1.7%
Papua 425 4% 5 3% 1.1%
Others 69 1% 1 1% 1.6%
Total 11,784 100% 175 100% 1.5%
Fig. 40: Breakdown of Indonesia’s nickel reserves – 76% are Fig. 41: Breakdown of Indonesia’s nickel resources – 75% are
classified as medium/low grade (i.e. <1.7 grade) classified as medium/low grade (i.e. <1.7 grade)
24% 25%
76% 75%
Nickel ore <1.7% Nickel ore >1.7% Nickel ore <1.7% Nickel ore >1.7%
While the robust outlook in EV and battery manufacturing (coupled with the
continuous shift to NMC 811) creates a huge windfall for overall nickel
demand, we believe that Indonesia could also benefit from the changing
steel/NPI production landscape as well, especially from China.
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Indonesia’s annual nickel production has grown from a mere 130k in FY15 to
760k in FY20 (+42% CAGR), driven by the ore export ban implemented by
government starting in late FY14, which in turn resulted in major Chinese
steel players investing in nickel smelters in Indonesia. This was also
supported by significantly lower NPI production cost in Indonesia vs. China
driven by lower ore purchase cost (-50%), lower smelting/overhead costs
(-16%), and zero freight cost (4% of China’s total cost) – Fig 45, which
encouraged massive investment flows. As of FY20, Indonesia was the
biggest nickel producer in the world.
The emergence of Chinese players in the Indonesian steel and nickel pig iron
(NPI) production is expected to continue in the coming years. Minerba
expects nickel consumed for production of NPI/ferronickel/stainless steel in
Indonesia to grow from c.500-600k tonnes in FY20 to 1.2-1.3m tonnes by
FY30F, in-line with an increase in the number of smelters from 26 in FY20 to
39 in FY30F.
Fig. 42: Global nickel production – Indonesia’s nickel production grew 42% CAGR FY15-20F to c.760k tonnes, now the biggest global
producer (30% of global production)
3,000
2,630 2,610
2,450 2,500
2,500 2,400
2,220 2,280 364
549 2,160 362
2,090 362
1,940 596 348 61
2,000 430 120 73
138 341 371 74 181 120
1,660 277 95 160 110 150
1,580 1,570 1,590 102 79 176 159
1,490 139 223 100 93 170
1,400 109 93 160 103 170 208
1,500 295 259 250 90 234 235 235 98 200
301 205 214
288 202 220 236 216 279
75 59 59 164 245 222 179 280
52 83 85 68 54 79 246
77 82 79 158 215 275 178 186 204 215 272 323
1,000 255 260 132
198 233 137 170 131 207 320
161 200 165 255 239 269 214 345
189 185 130 267 446
125 103 93 222
500 112 103 269 366
280 277 262 270 424 523 554 853
315 320 173 347 760
80 84 137 606
27 59 290 440 345
160 140 229 193 203 232 228 177 130 199
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*
Indonesia Philippines Russia New Caledonia Australia Canada China Brazil Cuba United States Other countries Total
Source: Euromonitor, Indo Premier
Fig. 43: Indonesia nickel production by output type – robust growth Fig. 44: Government has introduced another round of nickel ore
since FY15 was driven by higher output in FeNi/NPI output export ban since Jan20 (previously in 2014-15 before relaxed in 2017)
800 70.0 64.8
700 60.0
600 48.4
50.0
500 40.8
582 40.0
400 461 30.2
30.0
300 22.1
20.0 17.6
200 229
36 126 10.6 10.4
86 9.0 7.7
39 77 54 78 10.0
100 27 32 4.2
82 79 78 76 72 92 0.0 0.0 0.0
- 0.0
2015 2016 2017 2018 2019 2020 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Nickel matte (Class 1) NPI C(lass 2) Ferrnonickel (Class 2) Nickel ore export
Page 16 of 42
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Sector Initiation
Fig. 45: RKEF cost difference – Indonesia’s RKEF production cost is 35% lower vs.
China’s
14,000
12,000
10,000
6,416
8,000
6,000
5,364
4,000
5,406
2,000
2,688
0 519
China RKEF Indonesia RKEF
Ore freight (US$/Ni tonne) Ore purchase cost (US$/Ni tonne) Smelting/others (US$/Ni tonne)
Fig. 46: Indonesia nickel production is set to grow by 11% CAGR FY20-30F – demand from
NPI/stainless steel shall grow by 10% CAGR FY20-30F, while demand for battery
production shall grow by 16% CAGR FY20-30F
Indonesia nickel: battery holding is a game changer especially for

ANTM
The government has announced plans to establish a battery holding
company to facilitate the development of a regional/global EV/battery
manufacturing supply chain in Indonesia. The Indonesia Battery Corporation
(IBC) will be consisted of 4 SOEs, namely ANTM, MIND ID (previously
Inalum), Pertamina, and PLN, which shall respectively spearhead a certain
area on the value chain along with prospective partners.
The structure of the battery holding is illustrated in Fig 47. Each of the 4
SOEs will spearhead specific areas in the battery supply chain (e.g. ANTM in
the mining/smelting/refining, MIND ID in the precursor/cathode
manufacturing, Pertamina in battery cell pack manufacturing, and PLN in the
assembly/integration/recycling). In each of the supply chain stages, a JV will
Page 17 of 42
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be formed which will consist of 1) direct participation by the SOEs, 2) direct

participation by the partners, and 3) minority participation by the IBC.
Currently, the government is still finalizing the formation of IBC, as well as the
partner selection for each of the supply chain – our check suggest that there
are already 7-11 short-listed partners for the overall value chain, including
giant battery manufacturers CATL (China) and LG Chemical (South Korea).
Fig. 47: Indonesia Battery Holding structure – the holding will be comprised of ANTM, MIND ID, Pertamina, and PLN, which each shall
spearhead a specific area in the EV/battery production supply chain in Indonesia
One of the biggest challenges to enable the battery supply chain would be
the manufacturing of intermediate materials for cathode/precursor
production, such as MHP (mix hydroxide precipitate), MSP (mix sulphide
precipitate), NiSO4 (nickel sulphate), or CoSO4 (cobalt sulphate). Despite
ample nickel supply, GMR estimates that >70% of global nickel supply is
actually unsuitable for EV/battery supply chain due to existing content of
minerals other than nickel/cobalt, which exacerbates the potential supply
issue.
One of the potential solutions would be using limonite/low grade nickel ore
processing through hydrometallurgy, or more commonly known as high
pressure acid leaching (HPAL), which allows effective extraction of the
nickel/cobalt content from the ore. Furthermore, HPAL also serves as one of
the most cost efficient ways of processing laterite ores into nickel sulphate
(Fig 48).
However, HPAL processing is not without its risks. Compared to RKEF
smelting process which is used for NPI/stainless steel production, HPAL is
much riskier due to 1) its higher capex intensity (US$65k per tonne capacity
US$13k per tonne capacity for RKEF) and 2) complicated process
parameters, which if executed poorly, could lead to a severe cost overrun.
With global HPAL success rates being quite low (Fig 49), it is clear that very
high level of expertise and experience will be needed.
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Fig. 48: Cost comparison of laterite ore processing for EV purposes – HPAL remains one
of the most cost competitive
Source: GMR, Indo Premier
Fig. 49: Summary of HPAL projects – quite minimal success rate in global HPAL projects
means that very strong level of experience and expertise is required
Unit capex
Capex Capacity
Project Country Operator (US$ k/Ni
(US$ m n) (k tonnes)
tonne)
Success in both Capex and Opex
Coral Bay Philippines SMM 500 24 21
Moa Bay Cuba Sherritt 451 38 12
Failure in capex, success in opex
Ramu PNG MCC 2,100 33 64
Taganito Philippines SMM 1,300 36 36
Ambatovy Madagascar Sherritt 5,500 60 92
Failure in both capex and opex
Goro New Caledonia Vale 6,200 60 103
Ravensthorpe Australia FQM 2,480 36 69
Murrin Murrin Australia Glencore 1,485 51 29
Shutdow n & Overhaul
Gordes Turkey Meta 360 10 36
Bulong Australia Wingstar 160 10 16
Caw se Australia Wingstar 234 9 26
Source: GMR, Ministry of Energy and Mineral Resources, Indo Premier
Another alternative would be to modify existing RKEF (rotary kiln electric

furnace) smelters and convert its output from Ferronickel (FeNi) to nickel
sulphate (NiSO4). While in theory this would be less risky vs. HPAL (i.e.
relatively more straightforward processing, less variability with processing),
the availability of suitable ore input, additional costs (extra US$3-4k/tonne)
and complexity in modifying current operations are the main challenges.
ANTM will be spearheading the mining and smelting/refining activities amid
its strategic position as it possess the largest nickel resource in the country.
Government indicatively targets for a combined annual production of 150k
tonnes of NiSO4 (which can be achieved through either HPAL or FeNi
conversion using RKEF smelters), though further details on the process and
the respective partners for each processing activities have yet to be finalized.
Page 19 of 42
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While we also note the emergence of several significant HPAL capacity from
foreign players, our discussions suggest that ANTM will be the
exclusive/biggest nickel supplier for the battery supply chain to ensure
availability and sustainability of raw and intermediate materials used in the
supply chain. We believe that this shall secure demand outlook for
Indonesia’s nickel in the medium-to-long term, on top of growing demand
from NPI/stainless steel production.
Fig. 50: Nickel supply chain
Fig. 51: Nickel processing paths – HPAL is needed to process low grade nickel ore (i.e.
limonite) into nickel sulphate
Source: GMR, Indo Premier
Page 20 of 42
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Valuation: attractive valuations of Indonesian nickel stocks

Despite the seemingly steep sector valuation at 1.8x FY21F P/BV and 8.2x
FY21F EV/EBITDA, both near 10-year avg. of 1.7x P/BV and 10x
EV/EBITDA, respectively, our analysis suggests that Indonesia’s listed
nickel players EV/resource valuation of US$3-7/wmt remains attractive vs.
global peers average valuation at US$13/wmt. We believe that seemingly
steep valuation from P/BV and EV/EBITDA perspective stems from the
relatively small existing production/processing capacity compared to the
available reserves/resources. On the grand scheme of things, we believe
that the valuation gap in terms of EV/resource vs. global peers is
unjustified.
1) Higher profitability per tonne for Indonesian miners due to its much
lower production/processing cost.
2) Understated reserve/resource numbers, as exploration activities are
still underway with a significant portion of the permitted concession
area still unexplored as of today.
3) Robust growth potential as output/processing capacity expansion is on-
going for the next 3-5 years, which shall provide hefty upside to nickel
players’ profit/EBITDA.
We believe that there will be plenty of upside for Indonesia’s nickel miners.
As such, we initiate our coverage on Indonesia’s nickel sector with an
Overweight rating and Buy calls on both ANTM and INCO, though the
former is our top pick due to its strategic positioning to benefit from battery
holding initiative and massive resource base.
In particular, we believe ANTM’s valuation could also benefit from its
minority participation in the downstream activities amid its equity ownership
in the Indonesia Battery Corporation – note that currently the major listed
battery manufacturers are trading at valuations of 45x FY21F EV/EBITDA
and 17x FY21F EV/EBITDA – as such we believe that ANTM’s participation
will be accretive to ANTM’s current undemanding valuation of 8x FY21F
EV/EBITDA and 16x FY21F P/E.
Page 21 of 42
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Fig. 52: Peer comparison – Indonesia’s current EV/resource valuation of US$3-7/wmt is still way below global average of US$13/wmt
Mkt cap, EV, Resource, EV/Resource,
Com pany Mine Location
USD m n USD m n Mt (Wet) USD/WMT
Aneka Tambang Indonesia 4,050 4,383 1,367 3.2
Vale Indonesia Indonesia 3,562 3,185 455 7.0
Harum Energy Indonesia 993 835 155 5.4
Indonesia 8,605 8,402 1,977 4.3
Nickel Asia Corp Philippines 1,442 1,352 490 2.8
Global Ferronickel Holdings Philippines 275 250 140 1.8
Marcventures Holdings Philippines 84 89 99 0.9
Philippines 1,801 1,691 729 2.3
Norilsk Nickel Russia, South Africa 47,455 52,788 3,345 15.8
Russia 47,455 52,788 3,345 15.8
BHP Group Australia 173,579 191,482 926 206.7
IGO Australia 3,701 2,731 13 206.9
Nickel Mines Indonesia 2,416 2,539 259 9.8
Western Areas Australia 499 437 82 5.4
Mincor Resources NL Australia 319 248 5 53.0
Blackstone Minerals Vietnam, Australia 107 102 68 1.5
Australia 180,620 197,538 1,353 146.0
Jinchuan Group International Resources China 1,835 2,182 198 11.0
Xinjiang Xinxin Mining Industry China 256 558 30 18.6
China 2,092 2,740 228 12.0
First Quantum Minerals Zambia, Australia 14,195 22,823 386 59.2
Lundin Mining Corp United States 8,057 8,640 4 2257.1
Polymet Mining Corp United States 394 421 1,253 0.3
Canada 22,645 31,884 1,642 19.4
Ex Indonesia * 69,277 83,789 6,354 13.2
Source: Bloomberg, Company, Indo Premier Note: Market cap. as of 05 March 2021
Fig. 53: Lucrative valuations for downstream battery manufacturers could provide some
upside to ANTM as it will have indirect minority stake through IBC ownership
P/E EV/EBITDA P/BV
Com pany
FY21F FY22F FY23F FY21F FY22F FY23F FY21F FY22F FY23F
LG Chem 27.4 23.8 20.0 11.8 10.3 9.0 3.3 3.0 2.6
CATL China 101.9 75.2 63.5 47.8 35.8 27.6 12.0 10.6 10.3
Samsung SDI 42.5 33.2 25.0 20.3 16.7 14.3 3.4 3.1 2.9
Panasonic 22.8 15.6 13.7 7.6 6.5 6.0 1.5 1.4 1.3
Aggregate 44.6 34.4 28.7 17.4 14.5 12.6 4.1 3.7 3.4
Market capitalization as of March 4, 2021
Source: Bloomberg, Company, Indo Premier
Page 22 of 42
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Fig. 54: Aggregate nickel P/BV stood at 1.8x FY21F P/BV vs. 10-year Fig. 55: Aggregate nickel sector EV/EBITDA stood at 8.2x FY21F
average of 1.7x P/BV EV/EBITDA vs. 10-year average of 10x EV/EBITDA
4.0 25.0
3.5
20.0
3.0 2.9
2.5 15.0
2.0 13.1
1.7 10.0 10.2
1.5
7.2
1.0
5.0
0.5 0.6
0.0 0.0
Mar-20
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Mar-16
Sep-16
Mar-17
Sep-17
Mar-18
Sep-18
Mar-19
Sep-19
Sep-20
Mar-21
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Mar-16
Sep-16
Mar-17
Sep-17
Mar-18
Sep-18
Mar-19
Sep-19
Mar-20
Sep-20
Mar-21
Metals P/BV AVG +1STD -1STD Metals EV/EBITDA AVG +1STD -1STD
Fig. 56: Peer comparison

P/E (x) EV/EBITDA (x) P/BV (x)
Closing Target
Ticker Upside Recommendation
Price Price 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F
ANTM 2,230 4,200 88% Buy 43.9 17.1 10.5 15.1 8.3 5.7 2.8 2.4 2.1
INCO* 4,550 6,000 32% Buy 37.9 19.5 17.8 10.3 8.2 8.2 1.5 1.4 1.3
Source: Bloomberg, Indo Premier Share price closing as of: 09 March 2021
*INCO’s 2020 using actual number
Page 23 of 42
Aneka Tambang BUY
Company Initiation | Metals & Mining | ANTM IJ | 09 March 2021
Stock Data
Target price Rp4,200
Prime beneficiary of Indonesia’s nickel
Prior TP N/A boom; our top pick for the sector
Current price Rp2,230
Upside/downside +88%
 We expect ANTM’s nickel EBITDA to grow by 49% CAGR FY20-23F
Shares outstanding (mn) 24,031
driven by higher nickel ore sales volume and positive price outlook.
Market cap (Rp bn) 53,589  Gold EBITDA shall also grow by 20% CAGR FY20-23F driven by volume
Free float 35% recovery (from low base) and structural improvement in trading margin.
Avg. 6m daily T/O (Rp bn) 1,183  Current price implies a long-term nickel price of US$13k (vs. current
US$16k) and hasn’t factor-in the gold margin recovery. Initiate with Buy.
Price Performance
Nickel development shall be the key growth driver
3M 6M 12M
We see robust growth prospects for ANTM’s nickel ore sales volume (+48%
Absolute 74.2% 170.3% 301.8%
CAGR FY20-23F) amid growing domestic NPI/stainless production and
Relative to JCI 69.7% 151.8% 281.1%
demand from EV/battery supply chain in the medium/long term, which shall
52w low/high (Rp) 348 – 3,190
allow ANTM to leverage its largest nickel resources in the country (1.4bn wmt
as of FY20). Coupled with higher ferronickel volume amid capacity expansion
70%
60% starting in FY22F (+6% CAGR FY20-23) and positive nickel price trend (we
50% assume US$17k/tonne vs. spot of US$16k/tonne), we pencil-in its
40%
revenue/EBITDA to grow by 33%/49% FY20-23F CAGR.
30%
20%
Structural improvement in the gold business should not be overlooked
10%
0%
Gold revenue/EBTIDA are expected to grow by 15/20% CAGR FY20-23F on
-10% the back of volume recovery (+16% FY20-23F CAGR) and structural
improvement in trading business (management guided gold trading margin of
JCI Index ANTM IJ
5-6% vs. 1-3% historically) as it focuses more on domestic sales, which bears
a lower cost structure (15-20% lower vs. export sales). Further upside shall
come from successful exploration, translating to higher sales volume derived
Major Shareholders from its own production (higher margin of 30-40% vs. trading’s 5-6%).
Indonesia Asahan Aluminium 65.0%
Plenty of upside has yet to be priced-in, especially from nickel
We assign a target valuation of Rp33tr (32% of its overall EV) for its gold
business, though majority of the valuation shall be driven by its nickel
business at Rp65tr (64% of its overall EV) which implies a target EV/resource
valuation of US$3.2/wmt which is at the lower-end of the valuation range of
Indonesian nickel players (US$3-7/wmt) and well below global peers average
of US$13/wmt. We think that the current share price still implies a very
conservative long-term nickel price assumption of US$13k/tonne, and has yet
to factor in the structural improvement in ANTM’s gold trading business.
Initiate with Buy rating; ANTM is our top pick for the sector
Initiate coverage with a SOTP-based valuation of Rp4,200/sh, which implies
target FY21F multiples of 15x EV/EBITDA and 33x P/E, but only 0.1x FY21F
PEG amid robust EBITDA/EPS growth prospects. We have yet to fully factor-
in future demand from EV/battery supply chain amid lack of further details on
its future projects, though our preliminary analysis suggests another 15-25%
Timothy Handerson upside to our target TP should we factor in 50-150k HPAL capacity addition.
Financial Summary (Rp bn) 2018A 2019A 2020F 2021F 2022F
timothy.handerson@ipc.co.id
Revenue 25,275 32,719 25,044 29,248 37,210
+62 21 5088 7168 ext. 714 EBITDA 2,471 2,355 3,814 6,618 9,051
Net profit 1,636 194 1,221 3,131 5,086
EPS growth 1099% -88% 530% 157% 62%
ROE 8.6% 1.0% 6.5% 15.2% 21.2%
Anthony PER (x) 32.8 276.5 43.9 17.1 10.5
PT Indo Premier Sekuritas EV/EBITDA (x) 24.0 24.8 15.1 8.3 5.7
Dividend yield 0.0% 0.6% 0.1% 0.8% 2.0%
anthony@ipc.co.id IPS vs. consensus 94% 171% 239%
+62 21 5088 7168 ext. 715 Source: Company, Indo Premier Share price closing as of: 09 March 2021

09 March 2021
Company Initiation
Aneka Tambang
Plenty of upside to nickel
ANTM’s ferronickel production reached 26k tonnes (flattish yoy), a resilient
performance as volume picked up in 2H20 and in-line with the recovery of
stainless steel demand especially from China. For FY21F management
guides 26-27k tonnes of ferronickel production/sales volume, flattish yoy as
it currently runs at maximum effective capacity.
Further capacity expansion is underway with the East Halamera project
(13.5k tonnes) now at 98% construction progress and expected to come
online in 1H22, though capacity utilization shall increase gradually before
reaching the optimal level (80-85%) in about 3 years. Taking into account
the additional capacity, we pencil in ferronickel sales volume of 6% CAGR
FY20-23F.
On the other hand, ANTM guides for robust growth to come from its nickel
ore sales. As a background, nickel ore sales previously reaching an all-time
high level of 7.6m tonnes in FY19 after the government slightly relaxed the
nickel ore export regulation (i.e. allowing export of nickel ore with grade of
<1.7%); note that previously the government introduced a full nickel ore
export ban in FY14, which resulted in ANTM’s nickel ore sales dropping to
zero vs. previous peak of 10m tonnes in FY13 prior to the ban.
However, ANTM’s nickel ore sales volume dropped to 3.3m tonnes in FY20
as the government introduced another round of ore export ban as an
initiative to develop value-add processing activities in Indonesia. For
FY21F, ANTM guides for a significant increase in nickel ore sales volume
to 6.7m tonnes (+100% yoy) in-line with higher demand from local
smelters, especially in the Morowali (Southeast Sulawesi) area. Demand
for ANTM’s nickel ore sales in the coming years shall be driven by demand
from higher capacity from local NPI/ferronickel smelters (+48% CAGR
FY20-23F)
The long-medium term growth driver will be the commencement of
Indonesia Battery Corporation; our channel checks suggest that
government is targeting annual NISO4 production capacity of 50-150k
tonnes, which may translate to incremental nickel ore demand of 5-10m
tonnes p.a., though further details have yet to be finalized (such as
processing method to use e.g. RKEF/HPAL, and the cathode/precursor
partner as well). Amidst the lack of official details, we haven’t factored-in
the upside from the battery holding.
Fig. 57: Summary of ferronickel sales volume forecast

Ferronickel sales volum e (k tonnes)FY18 FY19 FY20F FY21F FY22F FY23F
Pomalaa 24 26 26 26 26 27
yoy% 12% 8% -1% 0% 0% 4%
East Halmahera 0 0 0 0 4 4
yoy% NA NA NA NA NA N/A
Total ferronickel 24 26 26 26 30 31
yoy% 12% 8% -1% 0% 16% 3%
Source: Company, Indo Premier
Fig. 58: Summary of nickel ore production/sales volume forecast

Nickel ore (m tonnes) FY18 FY19 FY20F FY21F FY22F FY23F
Production volume (m tonnes) 9.3 8.7 4.8 8.4 10.0 12.0
yoy% 67% -7% -45% 75% 19% 20%
Sales volume (m tonnes) 6.3 7.6 3.3 6.7 8.7 10.7
yoy% 124% 19% -56% 103% 30% 22%
Page 25 of 42
09 March 2021
Company Initiation
Aneka Tambang
Conservative gold volume outlook, though shift to domestic volume

ANTM’s gold business is largely consisted of sales volume from its trading
business (90-95% of volume), while sales coming from its own mining
operation is relatively small (5-10% of sales volume) amid limited
production capacity and resource/reserves. In FY20, ANTM’s gold sales
volume dropped to 700k oz (-36% yoy) largely driven by the significant
drop from gold trading business (-38% yoy) as sentiment weakened during
the pandemic year, while sales volume from its own production was
relatively flat yoy at 60k oz.
Management guided for a conservative gold sales volume of 630k oz (-10%
yoy) as it expects demand recovery to be gradual, though this shall be
partially offset by better margin amid the increase in proportion of sales
volume allocated for domestic buyers (i.e. lower costs incurred on domestic
sales by 15-20%). Indeed, we have seen signs of improving margins in
3Q/4Q20, as we estimate the operating margin for its trading business
improved to 4-6% vs. historical levels of 1-3%, in-line with higher domestic
sales proportion of 70-80% vs. 30-50% historically. Our discussion with the
management suggests that the changes is expected to be sticky, and
guides for a sustainable gold trading operating margin of 5-6% going
forward.
Fig. 59: Summary of ferronickel sales volume forecast

Gold sales volum e (k oz) FY18 FY19 FY20F FY21F FY22F FY23F
Gold trading sales volume 1,031 640 574 790 940 940
yoy% 24% -38% -10% 38% 19% 0%
Gold sales volume from mining 63 60 60 60 60 60
yoy% 0% -5% 0% 0% 0% 0%
Total gold sales volum e 1,094 700 634 850 1,000 1,000
yoy% 22% -36% -9% 34% 18% 0%
Financials: nickel shall be the growth driver

We pencil in ANTM to see revenue growth of 20% CAGR FY20-23F, largely
driven by robust growth from nickel ore sales (+107% CAGR FY20-23F),
while gold (+15% CAGR FY19-22F) and ferronickel (+11% CAGR FY20-
23F) is expected to be more moderate.
Fig. 60: Summary of revenue forecast

Revenues (Rp bn) FY18 FY19 FY20F FY21F FY22F FY23F
Gold 16,706 22,466 17,310 16,537 22,185 26,100
yoy% 127% 34% -23% -4% 34% 18%
Nickel 7,622 8,577 6,539 10,544 12,843 15,530
yoy% 66% 13% -24% 61% 22% 21%
Others 947 1,675 1,195 2,167 2,183 2,198
yoy% 38% 77% -29% 81% 1% 1%
Total revenues 25,275 32,719 25,044 29,248 37,210 43,828
yoy% 100% 29% -23% 17% 27% 18%
Concurrently, we pencil in EBITDA growth of 39% CAGR FY20-23F amid the

robust revenue growth outlook and margin expansion (Fig 62) especially
from nickel (from bottom of 34% in FY20F to 42-51% in FY21-22F) on the
back of a higher nickel price assumption of US$17k/tonne in FY21-23F vs.
FY20 average of US$13.8k. Blended gold EBITDA margin shall also improve
Page 26 of 42
09 March 2021
Company Initiation
Aneka Tambang
to 8-10% in FY21-23F vs. 7% in FY20F (bottom of 3% in FY19) largely due

to the structural improvement in gold operating margin
Beyond FY23F, further upside shall come from additional demand from
EV/battery supply chain, which could provide additional EBITDA of Rp2.7-8tr
p.a. assuming 50-150ktpa of annual capacity and a conservative cash
margin of US$3-5k/tonne – this translates to 30-90% upside to FY23F
EBITDA, though we have yet to factor this in our base case forecast amid
lack of further details on the project and higher risk associated with the
limonite ore processing (i.e. execution risk with HPAL/higher cost associated
with ferronickel or nickel matter conversion which makes the project more
susceptible to adverse changes in nickel price).
Fig. 61: Summary of EBITDA forecast

EBITDA (Rp bn) FY18 FY19 FY20F FY21F FY22F FY23F
Gold 681 768 1,282 1,638 1,977 2,212
yoy% 41% 13% 67% 28% 21% 12%
Nickel 2,812 2,591 2,211 4,447 6,537 7,392
yoy% 88% -8% -15% 101% 47% 13%
Others 346 365 321 533 537 542
yoy% 40% 5% -12% 66% 1% 1%
Total EBITDA 3,838 3,723 3,814 6,618 9,051 10,145
yoy% 73% -3% 2% 74% 37% 12%
Fig. 62: Summary of EBITDA margin

EBITDA m argin (%) FY18 FY19 FY20F FY21F FY22F FY23F
Gold 4% 3% 7% 10% 9% 8%
Nickel 37% 30% 34% 42% 51% 48%
Others 37% 22% 27% 25% 25% 25%
Blended EBITDA m argin 15% 11% 15% 23% 24% 23%
As such, we expect net profit of Rp1.2tr in FY20F before picking up to Rp3.1-

6.3tr p.a. in FY21-23F (39% CAGR FY20-23F). We expect ANTM’s
ROA/ROE to improve to 10-16%/15-22% in FY21-22F vs. 4%/6.5% in
FY20F.
Fig. 63: We pencil in net profit growth of 39% CAGR FY20-23

7,000 1200%
6,295
6,000 1000%
5,086
5,000 800%
4,000 600%
3,131
3,000 400%
2,000 1,636 200%

1,221
1,000 0%
194
0 -200%
FY18 FY19 FY20F FY21F FY22F FY23F
Net profit yoy%
Page 27 of 42
09 March 2021
Company Initiation
Aneka Tambang
Fig. 64: We expect ROA/ROE to improve to 10-16%/15-22% in FY21- Fig. 65: Gearing forecast – we expect ANTM to have net cash position
23F vs. 4%/6.5% in FY20F in FY22-23F amid robust EBITDA growth
25.0% 60.0%
22.3% 50.3%
21.2% 50.0% 47.2% 44.4%
20.0% 38.9%
40.0% 32.9%
15.6% 28.5% 27.1% 28.1%
15.2% 30.0%
15.0% 14.1% 20.6%
20.0%
9.6% 10.0% 6.7%
10.0% 8.6%
6.5% 0.0%
5.2%
5.0% 4.0% -10.0%
-8.8%
0.6%1.0% -20.0%
0.0% -30.0% -21.5%
FY18 FY19 FY20F FY21F FY22F FY23F FY18 FY19 FY20F FY21F FY22F FY23F
ROA ROE Gross gearing Net gearing
Source: Company, Indo Premier Source: Company, Indo Premier
Valuations: plenty of upside yet to be priced-in

We initiate our coverage on ANTM with a Buy rating with a SOTP-based
target price of Rp4,200/sh, implying a target multiple of 15x FY21F
EV/EBITDA and 33x FY21F P/E, which seems reasonable considering
robust EBITDA/profit growth prospects and our TP implies a target PEG of
0.1x in FY21F.
We assign a target valuation of Rp65tr for ANTM’s nickel business (WACC:
10.9%, LTG: 0%), which accounts for 64% of our consolidated target
valuation as we assign a long-term nickel price assumption of
US$17k/tonne, relatively in-line with the current spot price of US$16.3k;
this implies an undemanding EV/resource target valuation of U$3.2/wmt, at
the lower end of the valuation range for its Indonesian peers (US$3-7/wmt)
and well global peers average (US$13/wmt). Note that we haven’t factored-
in the valuation upside from the potential HPAL/RKEF project designated
for the battery manufacturing, which we estimate could add Rp16-26tr to
our base-case target price (+15-25% upside), assuming 150ktpa of output
capacity, US$3-5k EBITDA/tonne, and 50% equity ownership on the
project.
We also assign a target valuation of Rp33tr (WACC: 10.9%, LTG: 5%) for
the gold business on the back of a long-term gold price assumption of
US$1,800/oz and gold trading operating margin of 6%, in-line with the
management’s guidance. Further upside shall come from successful gold
exploration, which could boost its existing resources and increase
proportion of sales volume coming from own production (which boasts
much higher operating margin of 30-40% vs. trading business’ 9-10%).
Page 28 of 42
09 March 2021
Company Initiation
Aneka Tambang
Fig. 66: SOTP-based valuation summary

ANTM valuation Rp tr % of total Rem arks
Gold 33.0 32% WACC: 10.9%, long-term gold price assumption of US$1800/oz
Nickel 65.3 64% WACC: 10.9%, long-term nickel price assumption of US$17k/oz
Others 2.1 2% Target multiple of 3x FY21F EV/EBITDA
Asset value 100.5 99%
Net cash 1.5 1%
Equity value 101.9 100%
No of shares 24
Target price 4,200
Implied FY21F EV/EBITDA (x) 15
Implied FY21F P/E (x) 33
Implied FY21F PEG (x) 0.1
Implied EV/resource (US$/w mt) 3.2
ANTM currently trades at an undemanding valuation of 8x FY21F

EV/EBITDA, 17x FY21F P/E, and EV/resource valuation of US$2.7/wmt.
Our target price suggests a hefty 88% upside from current share price:
1) We believe that the current share price is still factoring in a very
conservative long-term nickel price assumption of US$13k/tonne (vs.
our assumption/spot of US$17k/16.3k per tonne. This derives majority
of the upside implied by our TP.
2) Concurrently, while we think the market is already pricing-in long term
gold price assumption of US$1,700/oz (in-line with spot), we believe
that the current share price still factors in long-term gold EBITDA
margin of 3-5% (vs. still below guidance of 6%), as it has yet to take
into account the structural improvement in cost structure.
Fig 67-68 shows the sensitivity of ANTM’s valuation towards different long-
term gold and nickel price assumptions; our sensitivity analysis significantly
larger impact from changes in nickel price vs. gold, in-line with the rising
contribution of ANTM’s nickel revenues. Largest risk to our call would be
lower nickel/gold prices, as well as execution risk with regards to future
projects.
Fig. 67: Profitability/valuation sensitivity to changes in nickel price

Bear Bear Base Bull Bull
Nickel sensitivity
case 1 case 2 case case 1 case 2
FY21F net profit (Rp tr) 2.2 2.6 3.1 3.6 4.1
vs. base case -31% -15% 0% 15% 31%
FY21F EBITDA (Rp tr) 5.4 6.0 6.6 7.2 7.9
vs. base case -19% -9% 0% 9% 19%
Gold valuation (Rp tr) 33.0 33.0 33.0 33.0 33.0
vs. base case 0% 0% 0% 0% 0%
Nickel valuation (Rp tr) 51.2 58.3 65.3 72.4 79.5
vs. base case -22% -11% 0% 11% 22%
ANTM valuation (Rp tr) 88.8 95.3 101.9 108.5 115.1
vs. base case -13% -6% 0% 6% 13%
Target price (Rp/sh) 3,700 4,000 4,200 4,500 4,800
vs. base case -12% -5% 0% 7% 14%
Nckel price assumption (US$/tonne) 15,000 16,000 17,000 18,000 19,000
vs. base case -12% -6% 0% 6% 12%
Gold price assumption (US$/oz) 1,800 1,800 1,800 1,800 1,800
vs. base case 0% 0% 0% 0% 0%
Page 29 of 42
09 March 2021
Company Initiation
Aneka Tambang
Fig. 68: Profitability/valuation sensitivity to changes in gold price

Gold sensitivity
FY21F net profit (Rp tr) 2.9 3.0 3.1 3.2 3.3
vs. base case 0% 0% 0% 3% 7%
FY21F EBITDA (Rp tr) 6.3 6.5 6.6 6.8 6.9
vs. base case 0% 0% 0% 2% 4%
Gold valuation (Rp tr) 28.1 30.5 33.0 35.4 37.9
vs. base case 0% 0% 0% 7% 15%
Nickel valuation (Rp tr) 65.3 65.3 65.3 65.3 65.3
vs. base case 0% 0% 0% 0% 0%
ANTM valuation (Rp tr) 97.3 99.6 101.9 104.3 106.6
vs. base case 0% 0% 0% 2% 5%
vs. base case 0% 0% 0% 2% 5%
Nckel price assumption (US$/tonne) 17,000 17,000 17,000 17,000 17,000
vs. base case 0% 0% 0% 0% 0%
Gold price assumption (US$/oz) 1,600 1,700 1,800 1,900 2,000
vs. base case 0% 0% 0% 6% 11%
Fig. 69: ANTM’s foreign ownership Fig. 70: ANTM’s local ownership
12.0% 30.0%
9.9% 29.0% 28.6% 28.8%

10.0% 9.1% 28.2%
28.0% 27.9%
28.0%
8.0% 8.0% 27.2%
8.0% 26.9% 26.8%
6.6% 6.9% 27.0%
5.9%
6.0% 26.0%
4.8% 4.7%
24.9%
25.0%
4.0%
24.0%
2.0%
23.0%
0.0% 22.0%
Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Jan-21 Feb-21 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Jan-21 Feb-21
Source: Bloomberg, KSEI, Indo Premier Source: Bloomberg, KSEI, Indo Premier
Fig. 71: ANTM’s local fund ownership Fig. 72: ANTM’s local retail ownership
20.0% 18.0% 16.6% 16.7%
18.0% 17.4% 17.2%
16.6% 16.0% 14.7%
15.7% 14.4% 14.0%
16.0% 14.0%
14.0% 12.6% 11.4%
12.0%
11.3% 11.6% 10.2% 10.5%
12.0%
9.7% 10.0% 9.0%
10.0% 9.1%
8.0%
8.0%
6.0%
6.0%
4.0% 4.0%
2.0% 2.0%
0.0% 0.0%
Page 30 of 42
09 March 2021
Company Initiation
Aneka Tambang
Income Statement (Rp bn) 2018A 2019A 2020F 2021F 2022F

Net revenue 25,275 32,719 25,044 29,248 37,210
Cost of sales (20,613) (28,271) (19,663) (20,876) (25,926)
Gross profit 4,662 4,447 5,381 8,373 11,284
SG&A Expenses (3,106) (3,492) (2,673) (2,925) (3,721)
Operating profit 1,556 956 2,178 4,904 7,237
Net interest (870) (113) (413) (489) (479)
Forex gain (loss) 276 (236) 0 0 0
Others 1,051 80 (200) (400) (400)
Pre-tax income 2,013 687 1,565 4,014 6,358
Income tax (377) (493) (344) (883) (1,272)
Minority interest 0 0 0 0 0
Net income 1,636 194 1,221 3,131 5,086
Balance Sheet (Rp bn) 2018A 2019A 2020F 2021F 2022F

Cash & equivalent 4,299 3,636 4,582 7,078 10,847
Receivable 924 1,002 1,002 1,002 1,002
Inventory 2,028 1,796 1,796 1,796 1,796
Other current assets 1,248 1,230 1,230 1,230 1,230
Total current assets 8,498 7,665 8,611 11,107 14,876
Fixed assets 20,128 18,866 19,011 19,163 19,323
Other non-current assets 4,680 3,664 3,726 3,783 3,843
Total non-current assets 24,808 22,530 22,737 22,945 23,166
Total assets 33,306 30,195 31,348 34,052 38,042
ST loans 2,574 2,993 2,993 2,993 2,993

Payable 1,158 740 740 740 740
Other payables 124 96 96 96 96
Current portion of LT loans 1,656 1,464 1,464 1,464 1,464
Total current liab. 5,512 5,293 5,293 5,293 5,293
Long term loans 5,250 3,466 3,466 3,466 3,466
Other LT liab. 2,806 3,303 3,303 3,303 3,303
Total liabilities 8,055 6,768 6,768 6,768 6,768
Equity 9,148 10,221 10,221 10,221 10,221

Retained earnings 10,591 7,913 9,066 11,770 15,760
Total SHE + minority int. 19,739 18,133 19,286 21,990 25,980
Total liabilities & equity 33,306 30,195 31,348 34,052 38,042
Page 31 of 42
09 March 2021
Company Initiation
Aneka Tambang
Cash Flow Statement (Rp bn) 2018A 2019A 2020F 2021F 2022F
Net income 1,556 956 2,178 4,904 7,237
Depr. & amortization 915 1,400 1,636 1,714 1,814
Changes in working capital (1,524) (564) 0 0 0
Others 927 (157) (958) (1,772) (2,151)
Cash flow from operating 1,875 1,634 2,856 4,846 6,901
Capital expenditure (983) (555) (1,843) (1,922) (2,035)
Others (1,611) (331) 0 0 0
Cash flow from investing (2,594) (885) (1,843) (1,922) (2,035)
Loans 0 (1,364) 0 0 0
Equity 0 1,073 0 0 0
Dividends 0 (307) (68) (427) (1,096)
Others 0 (766) 0 0 0
Cash flow from financing (620) (1,363) (68) (427) (1,096)
Changes in cash (1,339) (615) 945 2,496 3,769
Key Ratios 2018A 2019A 2020F 2021F 2022F

Gross margin 18.4% 13.6% 21.5% 28.6% 30.3%
Operating margin 6.2% 2.9% 8.7% 16.8% 19.4%
Pre-tax margin 8.0% 2.1% 6.2% 13.7% 17.1%
Net margin 6.5% 0.6% 4.9% 10.7% 13.7%
ROA 5.2% 0.6% 4.0% 9.6% 14.1%
ROE 8.6% 1.0% 6.5% 15.2% 21.2%
ROIC 6.5% 4.2% 9.5% 18.5% 22.0%
Acct. receivables TO (days) 14 11 15 13 10

Inventory TO (days) 29 25 33 31 25
Payable TO (days) 17 12 14 13 10
Debt to equity 50.3% 47.2% 44.4% 38.9% 32.9%

Interest coverage ratio (x) 2.2 10.1 7.4 11.0 15.1
Net gearing 28% 27% 21% 7% -9%
Page 32 of 42
Vale Indonesia BUY
Company Initiation | Metals & Mining | INCO IJ | 09 March 2021
Stock Data
Target price Rp6,000
A pure nickel play
Prior TP N/A  We expect revenue/EBITDA growth of +22/27% CAGR FY20-23F driven
Current price Rp4,550 by higher production (+12% CAGR) and positive price trend.
Upside/downside +32%  Further divestment from current shareholders to comply with mining law
Shares outstanding (mn) 9,936 may provide more project possibilities in the long term, in our view.
Market cap (Rp bn) 45,210
 Current share price implies a long-term nickel price assumption of
Free float 20%
US$15.9k vs. our LT price of US$17k. Initiate with Buy and TP of Rp6k.
Avg. 6m daily T/O (Rp bn) 167
Revenue growth to be driven by capacity expansion and higher price…
Price Performance We expect revenue growth of 22% CAGR FY20-23F to be driven by higher
3M 6M 12M production volume (+12% CAGR FY20-23F) as new capacity from its RKEF
Absolute -10.8% 16.4% 104.0% project will start in FY23F (with initial utilization of 40-50%), as well as higher
Relative to JCI -15.3% -2.2% 83.3% ASP as we assume nickel price of US$17k/tonne in FY21-23F vs. US$13.8k
52w low/high (Rp) 1,440 – 6,725 in FY20. Beyond FY23F, growth shall be driven by 1) expansion of current
nickel matte production capacity to 90k/tonnes by FY25, 2) higher capacity
35% utilization from its RKEF project (to 80-90% by FY25-26F) and 3) output from
30%
25%
HPAL project (starting FY25, though INCO will be the minority).
20%
15% … which shall translate to robust EBITDA and cash flow generation
10%
5%
EBITDA is expected to grow by 27% CAGR FY20-23F to be driven by the
0% robust revenue and margin expansion (to 39-47% EBITDA margin in FY21-
-5%
-10% 23F vs. 35% in FY20F, still below 10-year high of 54% in FY10 when nickel
-15%
prices average at US$22-23k/tonne). Its EBITDA of US$370-550mn p.a. shall
be enough to cover the development capex of US$165-465mn p.a. in FY21-
JCI Index INCO IJ 23F allocated for RKEF (US$1.6bn with 30% equity portion and INCO has
51% stake) and HPAL project (US$2.5bn with 50% equity portion and INCO
has 30% stake).
Major Shareholders
Vale SA 43.8% Share divestment slated in FY25, a positive development strategically
Indonesia Asahan Aluminium 20.0% INCO’s majority shareholders are still required to divest another 11% shares
Sumitomo Metal Mining Co 15.0% by FY25F to comply with the new mining regulation which requires CoW
extension to IUPK to have foreign ownership of <50%. Our discussion with
the management suggests that government will have the right of refusal
before the shares are offered to SOEs and eventually private parties. Taking
cues from history, we believe that the price shall be fair (previous divestment
at 3% below market price at announcement day). Higher government stake
shall also open possibilities for INCO to participate in more government
initiatives/projects i.e. EV/battery supply chain, in our view.
Initiate coverage on INCO with Buy rating and TP of Rp6,000/sh
We initiate our coverage on INCO with a SOTP-based TP of Rp6,000/sh,
implying 11x EV/EBITDA (10Y avg: 9.7x) and EV/resource valuation of
US$6.4/wmt (at the upper range of Indonesian peers of US$3-7/wmt but
lower than global peers’ average of US$13/wmt). Current share price implies
a LT nickel price assumption of US$15.9k/tonne, lower than spot/our LT
Timothy Handerson assumption of US$16.3k/17k per tonne. Risk is lower nickel price.
Financial Summary (US$ mn) 2019A 2020A 2021F 2022F 2023F
timothy.handerson@ipc.co.id Revenue 782 765 829 893 1,414
+62 21 5088 7168 ext. 714 EBITDA 235 266 374 417 545
Net profit 57.4 83 161 176 205
EPS growth -5% 44% 95% 10% 16%
ROE 3.0% 4.2% 7.6% 7.8% 8.3%
Anthony PER (x) 54.3 37.8 19.4 17.7 15.2
EV/EBITDA (x) 12.2 10.3 8.2 8.2 6.6
PT Indo Premier Sekuritas Dividend yield N/A N/A N/A N/A N/A
anthony@ipc.co.id IPS vs. consensus 120% 113% 110%
+62 21 5088 7168 ext. 715 Source: Company, Indo Premier Share price closing as of: 09 March 2021

09 March 2021
Company initiation
Vale Indonesia
A setback in FY21F production, expect recovery in FY22F

Management guides for a lower FY21 nickel matte production of 65k
tonnes (-8% yoy) largely due to the rebuilding of one of its furnaces, which
shall the undertaken from May-Nov21 before recovering back to its full
running capacity of 70-75k tonnes (i.e. 90-95% of design capacity of 80k
tonnes) starting from FY22 onwards.
Our discussion with the management suggest that it plans to expand the
existing nickel matte production capacity to 90k tonnes in the medium term,
though INCO has yet to finalize the capex/timeline details for the
expansion. We conservatively assume that capacity expansion of existing
production capacity to 90k tonnes will only be effective starting in FY25.
Beyond the existing capacity, INCO also plans to develop 2 other projects,
namely:
1) RKEF project – expected capacity will be 73k tonnes p.a. with
estimated capex of US$1.6bn (i.e. US$22k/tonne of capacity), to be
financed by 70% debt and 30% equity.
INCO is currently still conducting the feasibility study for the project
and has yet to select a partner, though it aims to have 51% ownership
on the project. It targets for construction/operations to begin in
FY21/FY23 respectively.
2) HPAL project – expected capacity is at 40k tonnes p.a. with an
estimated capex of US$2.5bn (i.e. US$60k/tonne of capacity) to be
financed by 50% debt/50% equity (to reflect the higher execution risk
associated with the project).
It plans to partner with Sumitomo Metal Mining (SMM) for the HPAL
project amid the long-standing relationship with INCO and the latter’s
expertise in HPAL projects around the world, and expects to have 30%
ownership (the rest owned by SMM). While preliminary studies are
underway, our discussion with the management suggests that
commercial operation will only start in FY25 due to long preparation
time amid the highly complicated nature of HPAL projects.
Fig. 73: Production volume summary

Production volum e sum m ary (k tonnes) 2019 2020 2021F 2022F 2023F
Nickel matte 71 72 65 70 72
yoy% -5% 2% -10% 8% 3%
RKEF 0 0 0 0 29
yoy% N/A N/A N/A N/A N/A
HPAL 0 0 0 0 0
Total 71 72 65 70 101
yoy% -5% 2% -10% 8% 45%
Fig. 74: Sales volume summary

Sales volum e sum m ary (k tonnes) 2019 2020 2021F 2022F 2023F
Nickel matte 72 73 65 70 72
yoy% -5% 1% -11% 8% 3%
RKEF 0 0 0 0 29
HPAL 0 0 0 0 0
Total 71 72 65 70 101
yoy% -5% 2% -10% 8% 45%
Page 34 of 42
09 March 2021
Company initiation
Vale Indonesia
A second round of divestment slated in FY25

In Oct20 INCO had completed the divestment of its shares from majority
shareholders as part of the CoW amendment signed in FY14 previously.
Vale Canada Limited and Sumitomo Metal Mining Co., Ltd sold 14.1/5.1%
of their equity stake in INCO for a grand total of Rp5.5tr (@Rp2,780/sh) to
Inalum. Note the execution price was only 3% lower than the closing share
price of Rp2,870/sh on 11 June 2020 when the details of the transaction
was announced.
INCO’s majority shareholders are also required to divest another 11%
shares to comply with the new mining regulation, which requires foreign
ownership to be below 50% to be eligible for extension of permit from CoW
to IUPK as INCO’s permit will expire in FY25. Negotiations for the said
divestment will begin in FY23, in-line with the regulation (i.e. 2-years prior
to expiry).
With regards to the mechanism, our discussion with the management
suggests that central government will have the first right of refusal on the
shares, after which the shares can be offered to 1) SOE companies, or 2)
private parties, though we believe that acquisition by either
government/SOE company will be the likelihood scenario. Taking cues
from history, we believe that the divestment shall fairly priced, as the
previous transaction price very closely represented prevailing market price.
In the long run, we believe that the higher government ownership shall be
beneficial for INCO strategically. While the probability for existing/planned
developments to be directed for EV/battery production remains limited, in
our view (as these are built with long-term contracts with designated off-
takers in mind i.e. Vale/Sumitomo), we believe that INCO could potentially
benefit from future projects initiated by IBC.
Fig. 75: INCO’s shareholding summary – Vale Canada Limited and Sumitomo Metal
Mining divested a total of 20% shares to Inalum for a total value of Rp5.5tr (@Rp2,780/sh)
Previous Post Oct20 divestm ent
in bn shares No of shares % of total No of shares % of total
Vale Canada Limited 5.9 59.2% 4.4 44.3%
SMM 2.0 20.1% 1.5 15.0%
Vale Japan 0.1 0.6% 0.1 0.6%
Sumitomo Corporation 0.0 0.1% 0.0 0.1%
Inalum 0.0 0.0% 2.0 20.0%
Others 2.0 20.0% 2.0 20.0%
Total 9.9 100% 9.9 100%
Fig. 76: Resource breakdown

INCO nickel resource breakdow n in m dm t % of total
Sorow ako Saprolite reserve 108 24%
Sorow ako Saprolite reosurce 105 23%
Bahodopi Saprolite resource 49 11%
Pomalaa Limonite resource 131 29%
Pomalaa Saprolite resource 62 14%
Total reserve and resources 455 100%
Page 35 of 42
09 March 2021
Company initiation
Vale Indonesia
Robust EBITDA/net profit growth outlook on the back of higher price

We pencil-in revenue CAGR of 22% in FY20-23F on the back of pick-up in
volume growth (12% CAGR FY20-23F) and higher price (nickel price
assumption of US$17k/tonne in FY21-23F vs. US$13.8k/tonne in FY20).
We believe that further upside to revenue beyond FY23F shall be driven by
ramping-up of its RKEF capacity utilization (commercial operation to start in
FY23F with initial utilization of 40%) and commencement of its HPAL
project (FY25F).
As such, we expect EBITDA to grow by 27% CAGR FY20-23F as we
expect EBITDA margin to expand to 39-47% in FY21-23F vs. 35% in
FY20F largely attributed to higher nickel price. Net profit shall also grow by
35% CAGR FY20-23F, as we see ROA/ROE expanding to 6/8% in FY21-
23F vs. 4/4% in FY20.
Assuming construction for the RKEF/HPAL projects start in FY21-22F,
respectively (i.e. assuming 2/3 years of construction progress respectively),
we believe that INCO’s capex will peak at US$630-730mn p.a. in FY21-
23F; as it plans to finance the development through 70%/50% debt for the
RKEF/HPAL projects respectively, we estimate that INCO’s net gearing will
peak at 20% in FY23F vs. net cash position in FY21F.
Fig. 77: Revenue forecast – we pencil-in growth of +22% CAGR Fig. 78: EBITDA forecast – expect +27% CAGR FY20-23F amid robust
FY20-23F supported by higher volume (+12% CAGR) and prices revenue and margin expansion (to 39-47% vs. 35% in FY20)
1,600 70% 700 70%
1,414 628
1,400 60% 600 60%
1,200 50% 469
500 50%
423
1,000 893 40%
782 829 400 40%
765
800 30%
300 266 30%
600 20% 235
200 20%
400 10%
200 0% 100 10%
0 -10% 0 0%
2019 2020 2021F 2022F 2023F 2019 2020 2021F 2022F 2023F
Revenues (US$ mn) yoy% (RHS) EBITDA (US$ mn) yoy% (RHS)
Fig. 79: Net profit shall grow 35% CAGR FY20-23F, in-line with the Fig. 80: ROA/ROE shall improve to 6%/8% in FY21-23F vs. 4%/4% in
robust EBITDA growth outlook FY20
250 100% 9% 8%
8% 8%
205 8%
80%
200 7%
176 6%
161 6% 6%
60% 6%
150
5% 4%
40%
4% 4%
100 83 3%
20% 3% 3%
57
50 2%
0%
1%
0 -20% 0%
2019 2020 2021F 2022F 2023F 2019 2020 2021F 2022F 2023F
Net profit (US$ mn) yoy% (RHS) ROA ROE
Page 36 of 42
09 March 2021
Company initiation
Vale Indonesia
Fig. 82: …in-line with rising capex to US$630-730mn p.a. assuming

Fig. 81: Net gearing is expected to peak at 20% in FY23F….
development for RKEF/HPAL starts in FY21-22F
50% 46% 800 733 300%
686
40% 34% 700 633 250%
30% 600
20% 200%
18%
20% 500
12% 150%
10% 400
0% 0% 100%
0% 300
-2% 171 173 50%
-10% 200
-20% -13% 100 0%
-20%
-30% 0 -50%
2019 2020 2021F 2022F 2023F 2019 2020 2021F 2022F 2023F
Gross gearing Net gearing Capex (US$ mn) yoy% (RHS)
Initiate coverage with a Buy rating and SOTP-based TP of Rp6,000/sh

We initiate our coverage on INCO with a Buy rating and SOTP-based TP of
Rp6,000/sh, which implies target multiples of 26x FY21F P/E (vs. 3-year
average of 31x), 11x EV/EBITDA (vs. 10-year average of 9.7x) and
EV/resource valuation of US$6.4/wmt (at the upper range of Indonesian
peers’ range of US$3-7/wmt but lower than global peers’ average of
US$13/wmt).
INCO currently trades at 19x FY21F P/E, 8.2x FY21F EV/EBITDA, and
implied EV/resource valuation of US$6.8/wmt. Based on our analysis,
INCO’s current share price is factoring-in a long-term nickel price
assumption of US$15.9k/tonne, lower vs. current spot price/our long-term
nickel price assumption of US$16.3k/17k per tonne.
Note that our sensitivity analysis suggests that every US$1k change in our
long-term nickel price assumption shall impact EBITDA/target price by
13%/18%, respectively. Risk to our call would be an unexpected drop in
nickel prices should demand (from stainless steel and battery) turns out to
be worse-than-expected.
Fig. 83: Summary of INCO valuation

INCO valuation sum m ary US$ m n/Rp bn Rem arks
Ferronickel (US$ mn) 3,018 DCF-based valuation (WACC: 9.5%, WACC: 0%)
RKEF (US$ mn) 742 DCF-based valuation (WACC: 9.5%, WACC: 0%)
HPAL (US$ mn) 296 DCF-based valuation (WACC: 9.8%, WACC: 0%)
Asset value (US$ m n) 4,056
Cash (US$ mn) 434
Debt (US$ mn) (385)
Equity value (US$ m n) 4,105
USD/IDR 14,500
Equity value (Rp bn) 59,527
No of shares 9.9
Target price (Rp/sh) 6,000
Implied FY21F P/E 25.6
Implied FY21F EV/EBITDA 10.9
Implied EV/resource (in US$/w mt) 6.4
Page 37 of 42
09 March 2021
Company initiation
Vale Indonesia
Fig. 84: Nickel sensitivity – every US$1k increase/decrease in nickel price shall impact
EBITDA by 13% and TP by 18-19%
Sensitivity analysis
FY21F EBITDA (US$ mn) 276 325 374 423 471
vs. base case -26% -13% 0% 13% 26%
FY21F net profit (US$ mn) 86 124 161 198 235
vs. base case -46% -23% 0% 23% 46%
SOTP-based TP (Rp/sh) 3,800 4,900 6,000 7,100 8,200
vs. base case -37% -18% 0% 18% 37%
Nickel price assumption (US$/tonne) 15,000 16,000 17,000 18,000 19,000
vs. base case -12% -6% 0% 6% 12%
Fig. 85: INCO P/BV – now trading at 1.4x FY21F P/BV vs. 10Y Fig. 86: INCO EV/EBITDA – now trading at 8.2x FY21F EV/EBITDA vs.
average of 1.4x P/BV 10Y average of 9.7x EV/EBITDA
4.0 25.0
3.5
20.0
3.0
2.5 15.0
2.0 2.0 12.5
1.5 10.0 9.7
1.4
1.0 6.8
0.8 5.0
0.5
0.0 0.0
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Mar-20
Sep-20
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-21
INCO EV/EBITDA AVG +1STD -1STD

INCO P/BV AVG +1STD -1STD
Fig. 87: INCO’s foreign ownership Fig. 88: INCO’s local ownership
80.0% 35.0% 32.2% 32.1% 32.0%
70.0% 66.9% 67.0% 67.1%
30.0%
60.0%
25.0%
50.0%
20.0%
40.0%
15.0% 12.4% 13.0%
30.0% 11.8%
10.4%
8.6% 9.4%
10.0%
20.0%
11.3%
8.8% 7.3% 8.6% 8.2% 7.1% 5.0%
10.0%
0.0% 0.0%
Page 38 of 42
09 March 2021
Company initiation
Vale Indonesia
Fig. 89: INCO’s local fund ownership Fig. 90: INCO’s local retail ownership
10.0% 9.4% 5.0%
9.0% 8.6% 4.5% 4.3% 4.3%
8.2% 8.1% 4.0%
8.0% 7.4% 7.4% 4.0% 3.7%
3.5%
7.0% 6.3% 3.5% 3.1% 3.1%
3.1% 3.0%
5.8%
6.0% 3.0%
5.0% 2.5%
3.9%
4.0% 2.0%
3.0% 1.5%
2.0% 1.0%
1.0% 0.5%
0.0% 0.0%
Page 39 of 42
09 March 2021
Company initiation
Vale Indonesia
Income Statement (US$ mn) 2019A 2020A 2021F 2022F 2023F

Net revenue 782 765 829 893 1,414
Cost of sales (666) (640) (571) (591) (1,027)
Gross profit 116 124 258 302 388
SG&A Expenses (14) (7) (17) (18) (28)
Operating profit 103 117 241 284 359
Net interest 1 1 (13) (40) (66)
Forex gain (loss) 0 0 0 0 0
Others (14) (13) (22) (24) (37)
Pre-tax income 89 104 206 220 256
Income tax (32) (22) (45) (44) (51)
Net income 57 83 161 176 205
Balance Sheet (US$ mn) 2019A 2020A 2021F 2022F 2023F

Cash & equivalent 249 389 434 488 637
Receivable 107 60 60 60 60
Inventory 148 144 144 144 144
Other current assets 84 103 57 3 (146)
Total current assets 588 696 696 696 696
Fixed assets 1,467 1,479 1,979 2,486 2,892
Other non-current assets 167 140 140 140 140
Total non-current assets 1,634 1,619 2,119 2,626 3,032
Total assets 2,223 2,315 2,815 3,322 3,728
ST loans 0 0 0 0 0
Payable 97 113 113 113 113
Other payables 2 2 2 2 2
Current portion of LT loans 37 46 46 46 46
Total current liab. 137 161 161 161 161
Long term loans 0 0 385 770 1,120
Other LT liab. 144 134 134 134 134
Total liabilities 144 134 519 904 1,254
Equity 414 414 414 414 414

Retained earnings 1,528 1,606 1,767 1,943 2,147
Total SHE + minority int. 1,942 2,020 2,181 2,357 2,561
Total liabilities & equity 2,223 2,315 2,860 3,421 3,976
Page 40 of 42
09 March 2021
Company initiation
Vale Indonesia
Cash Flow Statement (US$ mn) 2019A 2020A 2021F 2022F 2023F
EBIT 103 117 241 284 359
Depr. & amortization 133 149 133 133 186
Changes in working capital 77 (73) 0 0 0
Others (174) 99 (81) (108) (155)
Cash flow from operating 138 292 293 308 390
Capital expenditure (171) (173) (633) (639) (592)
Others 5 0 0 0 0
Cash flow from investing (166) (151) (633) (639) (592)
Loans 0 0 385 385 350
Equity 0 0 0 0 0
Dividends 0 0 0 0 0
Others (24) 0 0 0 0
Cash flow from financing (24) (2) 385 385 350
Changes in cash (53) 140 45 54 149
Key Ratios 2019A 2020A 2021F 2022F 2023F

Gross margin 14.9% 16.3% 31.1% 33.8% 27.4%
Operating margin 13.1% 15.3% 29.1% 31.8% 25.4%
Pre-tax margin 11.4% 13.6% 24.8% 24.6% 18.1%
Net margin 7.3% 10.8% 19.4% 19.7% 14.5%
ROA 2.6% 3.6% 6.3% 5.7% 5.8%
ROE 3.0% 4.2% 7.6% 7.8% 8.3%
ROIC 5.4% 5.9% 10.5% 10.0% 10.6%
Acct. receivables TO (days) 54 40 26 25 15

Inventory TO (days) 77 83 92 89 51
Payable TO (days) 52 60 72 70 40
Debt to equity 0.0% 0.0% 17.7% 32.7% 43.7%

Interest coverage ratio (x) 60.1 72.2 27.7 10.3 8.2
Net gearing -13% -19% -2% 12% 19%
Page 41 of 42
09 March 2021
Sector Initiation
SECTOR RATINGS
OVERWEIGHT : An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a
positive absolute recommendation
NEUTRAL : A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral
absolute recommendation
UNDERWEIGHT : An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a
negative absolute recommendation
COMPANY RATINGS
BUY : Expected total return of 10% or more within a 12-month period
HOLD : Expected total return between -10% and 10% within a 12-month period
SELL : Expected total return of -10% or worse within a 12-month period
ANALYSTS CERTIFICATION
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the
subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or
indirectly, related to the specific recommendations or views expressed in the report.
DISCLAIMERS
This research is based on information obtained from sources believed to be reliable, but we do not make any
representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness.
Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any
recommendations contained in this document do not have any regard to the specific investment objectives, financial
situation and the particular needs of any specific addressee. This document is not and should not be construed as an
offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT Indo Premier Sekuritas or its
affiliates may seek or will seek investment banking or other business relationships with the companies in this report.

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Metals & Mining (Nickel) OVERWEIGHT

Sector Initiation | 09 March 2021

Sector Index Performance (JAKMINE)

Refer to Important disclosures in the last page of this report

Nickel demand is set to grow by 3-7% CAGR FY20-30F

Fig. 3: IEA expects nickel demand to grow 4-7% CAGR FY19-30

Bull case - IEA

Muted nickel demand from stainless steel….

Source: Euromonitor Source: Euromonitor

Source: Bloomberg, Euromonitor Source: Bloomberg, Euromonitor

… as well as plating/ferrous alloys

Fig. 9: Global annual domestic and outbound travel revenues (US$

Source: McKinsey Source: Bloomberg

Battery manufacturing is the new nickel demand driver

Source: MarkLines, Indo Premier Source: MarkLines, Indo Premier

Source: IEA, Indo Premier Source: IEA, Indo Premier

Data by ClimateTracker shows that most major economies are 1) planning to

Fig. 16: Summary of global emission and reduction target

Conventional vehicles EV Difference in lifetime carbon emission Conventional vehicles EV

Source: Carbon Brief Source: Carbon Brief

The role of battery specifically in the EV supply chain is a crucial one, as it is

Mobility Stationary Consumer Mobility Stationary Consumer

Other costs Cell cost Pack cost (excluding cell cost)

Source: Ministry of Energy and Mineral Resources, Indo Premier

Source: Massif Capital, Indo Premier

Due to these issues, coupled with technological advancement, most battery

Cost per Kwh

Source: Bloomberg, Indo Premier Source: Massif Capital, Indo Premier

Source: Roskill, Indo Premier

Despite Tesla’s recent aspiration to migrate from nickel-based battery

Source: MDPI, Indo Premier

Nonetheless, the major battery manufacturers’ commitment to expand nickel-

Source: McKinsey, Indo Premier Source: McKinsey, Indo Premier

Fundamentals points to robust price trend in the short/medium term

(50) 20% 60% 50%

(100) 10% 40%

Source: Bloomberg, Indo Premier Source: Bloomberg, Indo Premier

Source: Bloomberg, Indo Premier Source: Bloomberg, Indo Premier

Indonesia nickel: a vital supplier on a global scale

Nickel m etal resources (in m as % of

Indonesia 0.0 175.0 175.0 40%

Source: Euromonitor, Indo Premier

Source: Ministry of Energy and Mineral Resources, Indo Premier

Source: Ministry of Energy and Mineral Resources, Indo Premier

Indonesia nickel: battery holding is a game changer especially for

be formed which will consist of 1) direct participation by the SOEs, 2) direct

Source: Ministry of Energy and Mineral Resources, Indo Premier

Source: GMR, Indo Premier

Another alternative would be to modify existing RKEF (rotary kiln electric

Fig. 50: Nickel supply chain

Source: Ministry of Energy and Mineral Resources, Indo Premier

Source: GMR, Indo Premier

Valuation: attractive valuations of Indonesian nickel stocks

Source: Bloomberg, Indo Premier Source: Bloomberg, Indo Premier

Fig. 56: Peer comparison

Refer to Important disclosures in the last page of this report

Fig. 57: Summary of ferronickel sales volume forecast