ANTM - From mining excellence to powering the future

KBVS update
Friday, 12 Jan 2024

ANTM IJ - From mining excellence to powering the future 
(Upgrade to BUY; TP: IDR1,820)

- ANTM and CBL to build EV battery ecosystem in Indonesia. The HPAL and the EV battery (material, cells, and recycling) project is expected to be profitable boosted by the expertise of CATL and Lygend. Further details of the production capacity for the EV battery-related ecosystem and the HPAL project are yet to be disclosed.

- What are the implications of the recent transaction? We expect ANTM to derive part of the funding for these ventures from the recent divestment of SDA and FHT to CBL, providing ANTM with infusion of fresh cash totaling IDR7.0 tn.

- How these investments will create value? As per the company statement's projections, the HPAL project is expected to yield approximately 15.2% of IRR. This aligns reasonably well with industry standards for HPAL projects, which typically boast around a 20% IRR at the current nickel price, especially when factoring in the positive impact of cobalt credits. It's worth noting that CATL, the major EV battery producer in the world and the major shareholder of CBL, has demonstrated a strong financial performance, averaging 23% ROE over the past 2 years.

- Upgrade to BUY with TP IDR1,820 (previously IDR1,580). using DCF-based TP (WACC: 11.5%; LTG: -3%), which implied to 11.1x ‘24F EV/EBITDA. The upgrade is following the cash generated from the divestment of SDA and FHT. Like other nickel producers, ANTM is facing the challenge on the declined nickel price in 2024F.

Regards,
Benyamin Mikael - KBVS Research team