CIMB Inco Indonesia Result note - Surpassing consensus

(INCO IJ / INCO.JK, OUTPERFORM - Maintained, Rp4,475 - Tgt. Rp6,000, Basic Resources)

Maintain Outperform on Inco.1Q10 net profit (+344% yoy) was in line with our expectation and historical 1Q contributions at 23% of our FY10 forecast. The results were, however, 6% above consensus and also beat Antam's, its closest peer, as Inco is a pure nickel producer hence greater leverage on nickel price recovery. Production and sales volume were strong while costs were stable despite higher fuel prices and consumption. Sales volume should be stable in 2Q10, helped by inventory sales, while costs could decline on more usage of hydropower capacity. We maintain our DCF-based target price of Rp6,000 (WACC 11%). We also expect ASPs to be stronger in 2Q10 from a jump in nickel prices since March. We see stock catalysts from further sets of strong results.