Strengthened sell-side investment logic for nickel ore, with ANTM as the report's top pick
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Strengthened sell-side investment logic for nickel ore, with ANTM as the report's top pick
J.P. Morgan maintains a positive view on the Indonesian nickel sector, believing tighter ore quotas, HPM formula revisions, and a recovery in gold sales will drive ANTM to record earnings in 2026.
- ANTM target price is raised from Rp5,670 to Rp6,000, with Overweight maintained, implying about 49% upside.
- Approved 2026 nickel ore quota is about 240mn wmt, below prior guidance of 260-270mn wmt and also below Indonesia demand estimates of about 330-340mn wmt.
- The new HPM formula lifts reference prices, creating greater cost pressure for low-grade limonite sellers and non-integrated HPAL projects, but with limited negative impact on ANTM.
- ANTM benefits from the premium on high-grade saprolite ore and a recovery in gold refining/minting sales, with monthly NPATMI expected to reach about IDR1.3-1.4tn.
- INCO and MDKA remain Overweight, but target prices are cut to Rp9,000 and Rp4,030, respectively, due to rising ore and sulfur costs and pressure on HPAL margins.
Report interpretation
Overview
This report covers the Indonesia/ASEAN metals sector, focusing on Aneka Tambang, Vale Indonesia, and Merdeka Copper Gold. The core view is that tight supply-demand conditions for Indonesian nickel ore and changes to the HPM reference price formula will raise ore prices, benefiting upstream nickel ore sellers more clearly. Among them, ANTM is named the top pick due to its high-grade saprolite ore, recovery in gold sales, and lower regulatory downside impact.
Core views
J.P. Morgan remains constructive on the Indonesian nickel sector, but differentiates the impact across assets: ANTM is the clear winner under the current policy and pricing environment; INCO's long-term growth and strategic position in the nickel value chain remain intact, but HPAL project margins are under pressure from higher ore and sulfur costs; MDKA has multi-metal exposure to nickel, copper, and gold, and valuation is not high, but its target price is lowered due to lower gold price assumptions and higher HPAL costs.
Analysis framework
The report uses a combination of earnings forecast revisions, channel checks, HPM reference price formula impact assessment, SOTP, DCF, and P/E valuation. ANTM's target price is based on 9x 2027E earnings P/E; INCO's target price is based on SOTP for nickel matte, ore business, and HPAL interests; MDKA is based on project-level SOTP, with TB Copper assigned a 50% on-schedule execution probability and a 25% SOTP discount.
Methodology notes
ANTM's target price is based on 9x 2027E earnings P/E.
The 9x multiple is below the historical average of 12x, reflecting that investors are more likely to value the company through a dividend yield lens in a high commodity price environment; this multiple implies about an 11% dividend yield.
INCO and MDKA use the sum-of-the-parts valuation method.
INCO values its nickel matte, ore business, and HPAL interests separately; MDKA models each project, then adds/subtracts net cash/debt, and applies a 25% SOTP discount for its listed subsidiary structure.
Some of INCO's businesses are valued using long-term DCF.
INCO's nickel matte smelting business DCF assumes a long-term LME nickel price of USD17k/ton and 10% WACC.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Aneka Tambang (ANTM.JK / ANTM IJ)Top pick, with Overweight maintained and target price raised.
- Strengths
- High-grade saprolite ore is not materially negatively affected by HPM changes; nickel ore selling prices are above market; gold refining and minting sales are recovering; record earnings are possible in 2026.
- Weaknesses
- Earnings still depend heavily on nickel ore prices, gold supply, and licensing progress.
- Comparison
- Compared with INCO and MDKA, ANTM benefits more directly from rising upstream ore prices and faces less HPAL cost pressure.
- Risks
- Mining license delays, gold supply issues, and changes in nickel ore regulation.
- Vale Indonesia (INCO.JK / INCO IJ)Overweight maintained but target price lowered.
- Strengths
- Owns large high-grade nickel reserves, multiple growth projects, HPAL JVs, and mine expansion plans; its long-term position in the nickel value chain remains solid.
- Weaknesses
- Higher ore and sulfur costs will compress HPAL margins, and FY26/27E NPATMI forecasts are cut by 27%/1%.
- Comparison
- Long-term growth remains strong, but near-term cost shocks are greater than for ANTM.
- Risks
- Looser nickel supply, weaker long-term demand, changes in battery chemistry, and HPAL project execution delays.
- Merdeka Copper Gold (MDKA.JK / MDKA IJ)Overweight maintained but target price lowered.
- Strengths
- Has multi-metal exposure to nickel, copper, and gold; Pani gold mine output is ramping up; KOZVS nickel business profitability is improving; valuation is relatively undemanding.
- Weaknesses
- Higher HPAL costs and lower gold price assumptions offset part of the revenue improvement; the TB Copper project has execution timing uncertainty.
- Comparison
- Compared with ANTM, MDKA is more of a multi-asset SOTP rerating story; compared with INCO, its gold and copper assets provide additional optionality.
- Risks
- Metal prices below expectations, higher capex, slower ramp-up at the Pani gold mine, or failure to advance the TB Copper project.
Key data
- ANTM target priceRp6,000Jun-27 target price, previous Rp5,670, current price Rp4,030.
- ANTM implied upside~49%Based on the 21 Apr 26 price of Rp4,030.
- ANTM FY26/27 NPATMI forecast revision+16% / +17%Mainly driven by higher nickel ore prices and recovery in gold sales.
- Approved nickel ore quota~240mn wmtAs of 31 Mar, below the initial guidance of 260-270mn wmt and the demand estimate of about 330-340mn wmt.
- ANTM nickel ore price assumptionUSD70/tRaised by 19%, corresponding to spot prices above USD70/t.
- ANTM monthly NPATMI potential~IDR1.3-1.4tnAnnualized at about IDR16tn, above market FY26 consensus of about IDR9tn.
- INCO target priceRp9,000Jun-27 target price, previous Rp9,300, current price Rp6,925.
- MDKA target priceRp4,030Jun-27 target price, previous Rp4,270, current price Rp3,370, implying about 19% upside.
Impact & implications
If nickel ore quota approvals remain tight, the shortage of high-grade ore supply will continue to support earnings for ANTM and other upstream ore sellers; however, low-grade limonite and non-integrated HPAL projects may face multiple pressures from higher reference prices, ore costs, and sulfur costs. For portfolios, the report prefers ANTM for its high-grade ore, cash flow, and dividend support, while still recognizing the long-term growth of INCO and MDKA but emphasizing near-term cost pressure.
Risks
- ANTM fails or is delayed in obtaining nickel ore mining licenses.
- Gold supply issues affect ANTM refining and minting sales volumes.
- Changes in nickel ore regulation create cost or sales uncertainty.
- Indonesia releases excessive nickel supply through investment incentives or larger-scale licensing.
- Long-term nickel demand weakens, especially if battery chemistry shifts away from nickel-containing routes.
- HPAL project execution is delayed or ore and sulfur costs continue to rise.
- MDKA key project capex exceeds expectations, the Pani gold mine ramps up slowly, or TB Copper fails to advance.
What to watch
- The pace of 2026 RKAB mining license approvals and the final size of nickel ore quotas.
- Changes in spot prices for high-grade saprolite and low-grade limonite relative to the HPM reference price.
- Whether ANTM monthly gold sales recover from about 1 ton/month in 4Q25 to 3-4 tons/month, and rise further to 4-5 tons/month in 2Q26 and 2H26.
- Whether ANTM earnings momentum in 1Q26, 2Q26, and 2H26 validates the view of monthly NPATMI at about IDR1.3-1.4tn.
- HPAL project margins, sulfur costs, and ore procurement cost trends for INCO and MDKA.
- MDKA Pani gold mine production ramp-up, TB Copper project progress, and changes in SOTP discount.