Industrial metal prices rise, look at the stock recommendations of these mining issuers

Reporter: Danielisa Putriadita | Editor: Khomarul Hidayat

KONTAN.CO.ID – JAKARTA. The upward trend in industrial commodity prices has the potential to support growth in the performance of issuers in the industrial metal sector. Analysts are also optimistic that the performance of the industrial metals sector will improve as demand increases amid the economic recovery.

Quotes Bloomberg, the price of 3-month nickel contract on the London Metal Exchange (LME) as of Friday (8/10) rose 15.69% year to date (ytd) to US$ 19,221 per metric ton. Compactly, the price of tin also rose 77.68% ytd to US$ 36,156. Meanwhile, gold prices on the Commodity Exchange continued to decline by 8.05% ytd.

Kiwoom Sekuritas analyst Sukarno Alatas said the upward trend in industrial metal prices gave positive sentiment to the performance of issuers in the industrial metal sector. “The impact on industrial metal issuers will increase their performance along with high metal prices,” Sukarno said, Sunday (10/10).

However, Sukarno said that the rising trend of industrial metal prices must be used by issuers to boost sales volume. If the sales volume drops significantly, it can prevent revenue from growing even though there is an increase in the average selling price.

Also Read: China and India are threatened by an energy crisis, this is the prospect of future coal prices

In the second quarter of 2021, the sales volume of PT Vale Indonesia Tbk (INCO) rose 7% compared to the first quarter of 2021 to US$ 208.4 million.

Meanwhile, the sales of PT Aneka Tambang Tbk (ANTME) in the first semester of 2021, grew 87 percent to Rp 17.28 trillion from Rp 9.24 trillion in the same period last year.

However, the sales volume of PT Timah Tbk (TINS), down 60% from a repeat of 31,508 tons in semester I-2021 to 12,523 in semester I-2021.

Sukarno projects that this year’s sales volume for the industrial metal sector will potentially be higher than last year. Positive sentiment comes from potentially higher demand as vaccine distribution has expanded globally. As a result, industrial activities are also running again so that sales volume can increase.

“Global vaccination is already high, so the possibility of another lockdown is slim,” Sukarno said.

For TINS ​​sales volume, Sukarno projects that in the remainder of this year TINS ​​will be able to catch up with sales volume compared to the first semester of 2021. As a result, Sukarno remains optimistic that TINS’s performance throughout this year will continue to grow.

Sukarno advocated INCO among the industrial metal sector issuers. The reason is that INCO has a cheaper valuation ratio at PBV of 1.62 times. Meanwhile, the valuation of TINS ​​is at 2.26 times and ANTM is at 2.83 times.

According to Sukarno, INCO is superior because it has a fairly low debt ratio at 0.14 times compared to its competitors. Sukarno recommended buying INCO with a medium-term target price of Rp 5,325-Rp 5,550 per share.

The challenge for the industrial metal sector going forward is if the upward trend in prices is corrected. For example, the price of gold is currently still declining along with the economic recovery. Furthermore, a significant increase in metal prices also has the potential for a decline in the future.

However, in the long term, Sukarno remains optimistic that issuers in this sector have the opportunity to record positive performance, especially those selling nickel in line with the demand for this commodity for use in electric cars.

Meanwhile, RHB Sekuritas analyst Andrey Wijaya in his research, recommends buying shares of PT Merdeka Copper Gold (MDKA) with a target price of Rp 3,140 per share. Factors that support MDKA’s performance come from the improvement in the increase in production volume.

Andrey projects that MKDA’s copper production volume will increase by 191% yoy. Meanwhile, copper price is projected to be stable at US$ 9,000 or up 35% yoy.

The challenges ahead for this sector also come if global demand for commodities weakens more slowly than expectations of global economic recovery.