PEFINDO has assigned its idA rating with a stable outlook to PT Merdeka Battery Materials Tbk (MBMA)

(October 24, 2023)--The rating reflects MBMA’s vertically integrated operations, strong synergy with the group and strategic partners, and sizeable reserves and resources. However, the rating is constrained by risk of developing new projects and exposure to nickel price volatility.

The rating may be raised if MBMA strengthens its diversification profile, including by having more downstream projects in battery business. The rating may also be raised if the Company successfully operates its new projects in a timely manner and generates higher revenue than projected while maintaining its profitability indicators, which will further positively affect its financial profile on a sustained basis. However, the rating may be lowered if MBMA generates lower revenue or profit margins than projected due to underperformed new projects and aggressively finances its capital expenditure with substantial debt without compensated by a higher revenue or EBITDA, which may trigger a more aggressive financial ratio. The rating may also be under pressure if its revenue or EBITDA falls short of the projection due to a significant deterioration in nickel price, which will adversely affect its financial profile.

MBMA is a holding company of several operating entities located in Indonesia Morowali Industrial Park (IMIP): three Rotary Kiln Electric Furnace (RKEF) smelters, one nickel matte smelter, and Acid Iron Metal (AIM) project, and Konawe for nickel mining.

The Company is also in the process to build High Pressure Acid Leaching (HPAL) plants in IMIP and Konawe. As of September 30, 2023, its shareholders consisted of PT Merdeka Energi Nusantara (50.033%), Garibaldi Thohir (9.422%), Huayong International (Hong Kong) Limited (7.546%), Winato Kartono (5.432%), and public (27.568%). (ends)