Initiating Coverage with a BUY, Backed by price rally and production ramp-up
We initiate BUY on TINS with a target price of IDR 5,500/sh, implying 41% upside. Our valuation is derived from a 5-year DCF (FCFF), underpinned by a strong earnings growth outlook, applying WACC of 10.3% and terminal growth of 1.0%, which implies an equity value of IDR 40.7tn and translates into FY27F P/E of 11.6x, justified by outsized earnings expansion. We favor TINS for its attractive valuation, its potential for more than a twofold production ramp-up and strong leverage to an ongoing tin price rally – all amid global supply disruption. Key downside risks include renewed illegal mining activity, unexpected export restrictions imposed to accelerate downstreaming, incremental supply return from Man Maw and technological substitution risk in advanced semiconductor packaging – particularly increased adoption of Ag-sintering or Cu-paste that could have the structural effect of cutting demand for solder tin.

Unlocking Inner Beauty
As Indonesia’s dominant integrated tin producer, TINS is clearly entering an operational recovery phase, underpinned by govt. action to curb illegal mining within its IUP: currently confiscated assets of IDR 7tn materially improve production visibility, feedstock availability and pricing discipline across the domestic supply chain. 9M25 output reached 12,197 tons, with monthly production accelerating to c. 3,000 tons by Oct-25 (vs. historical c. 1,500 tons), while the 2025F target of 21,500 tons still implies sub-30% utilization and significant headroom. Assuming production normalization and steady global tin demand, we expect output to recover to 30,000 tons in 26F, hike to 40,000 tons in 27F, and reaching c.70,000 tons within 5-years (18% CAGR). This trajectory should lift 27F revenue to c. IDR 27tn (+146% vs. 2024) and net profit to c. IDR 3.2tn (+169% vs. 2024), supported by normalized monthly output of 5,000–6,000 tons, more flexible RKAB approvals, and Management confidence in achieving up to 80,000 tons of installed capacity, thus positioning TINS as a global top-tier tin producer.

Price Fledgling to the Sky
Global tin prices have decisively re-rated, surging to a three-year high of USD 57,000/ton in Feb-26 (+c. 84% YoY), as structurally tight supply, aggressive crackdowns on illegal mining in Indonesia and reduced smuggling unwind years of supply leakage that diverted up to 80% of formal output. Against this backdrop, TINS is entering a powerful earnings inflection, with FY25F ASP tracking at USD 33,500/ton and FY26F ASP projected at USD 44,000/ton (+33.9% YoY), supported by spot prices above USD 50,000/ton and capable of lifting revenue to IDR 21tn (+91.6% YoY) even without material volume upside. Cost discipline is strengthening in parallel, as higher in-house production and reduced reliance on third-party feedstock (c. 60% from 3^rd-party) drive tin ore input costs down to USD 12,000–13,000/ton (from USD 13,000–14,000/ton). With enforcement momentum intact, gross margins are set to structurally rebase toward ~25% (vs. 5-year avg. 20%), setting the stage for a step-change in 2026F earnings, to IDR 2.3tn (+114.6% YoY).

Cement Sector - Hanging Tough

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28 November 2024 - 07.00am

Cement Sector - Hanging Tough

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