Nickel Asia [NIKL 3.30, up 4.8%; 164% avgVol] [link] reported a Q2 net income of P1.35 billion, up 4.4% y/y from its Q2/23 net profit of P1.30 billion. On an H1 basis, NIKL’s revenues were down 15% y/y to P9.3 billion and its net income was down 38% y/y to just P1.7 billion. NIKL’s management team explained the drop as a result of lower nickel ore prices caused by the “present oversupply situation facing the nickel industry”. While NIKL sold 9% more ore in H1/24 than it did the previous year, the revenues that it earned as a result of those sales fell 16%.
MB bottom-line: There’s not much else to say here. Live by the sword and die by the sword. NIKL declined to provide any guidance on how it sees the global nickel market shaping up for the remainder of FY24 and into the future, but my Google research shows a general sentiment that FY24 will remain “flat” at $18,000/tonne levels as the demand for NIKL catches up to the global supply glut. Fitch Solutions said that it expects nickel prices to “rise steadily” beginning in FY25 and continuing through FY28 to $21,500/tonne, with a long-term price forecast of $26,000/tonne in 2033 “as the market surplus narrows significantly.” NIKL’s stock price back when nickel was trading at that FY28 projected level was around P5.90/share, and while that’s a 78% improvement from where the stock stands today, NIKL’s stock price isn’t exactly a pass-through of the underlying nickel ore price so there’s additional risk in adopting that kind of thinking.
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