This report is an updated version of the report published on 27 September 2024 at 4:06 PM AEST.

Nickel Industries Ltd (ASX: NIC)

NIC is an ASX listed nickel ore mining and nickel pig iron production company with operations in Singapore and Indonesia. It holds 80% stake in the Hengjaya Mine, Ranger Nickel project and in the Angel Nickel project.

Recommendation Rationale – SELL at AUD 0.9150

• Trading Around Resistance: NIC’s share price has surpassed the ‘Resistance 1’ level recommended on 12 September 2024; thus, share price can face resistance at the current levels.
• Technical Standpoint: Given that the 14-day RSI is currently around 71.626 level, indicating it is in the overbought zone and can face retracement in the short term.
• Profit Decline: During H1 FY24, Operating Profit and Profit After Tax declined by 20.7% and 71.5%, respectively.
• Heavy Dependence on Nickel Prices: The company's revenue and profitability are highly sensitive to global nickel prices. Any downturn in the nickel market could significantly impact EBITDA and overall financial performance.
• High Acquisition Costs: The recent acquisition of an additional 16.5% interest in the Excelsior Nickel Cobalt HPAL Project at a substantial cash cost raises concerns about the company's financial strategy and whether the investment will yield adequate returns. Moreover, the significant cash outflows associated with acquisitions may strain the company’s balance sheet, particularly if it leads to higher debt levels without corresponding increases in revenue.

NIC’s Daily Chart

Valuation Methodology: Price/Earnings Approach (FY Jun'25E) (Illustrative)

NIC is likely to trade at a slight premium based on the growing demand for nickel within renewable energy technologies, ability to mine both saprolite and limonite ores, and increased stake in the Excelsior Nickel Cobalt HPAL Project. The following peers have been considered for conducting valuation: Rio Tinto Ltd (ASX: RIO), Fortescue Ltd (ASX: FMG), and Bellevue Gold Ltd (ASX: BGL).

Considering that the stock is trading near its R2 level, market uncertainties, and risks associated, the share price can witness resistance at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 0.915, as of 27 September 2024, at 3:10 PM AEST.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 27 September 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.