Press Metal poised to post strong growth this year
PETALING JAYA: Press Metal Aluminium Holdings Bhd will likely post double-digit profit growth for the financial year ending Dec 31, 2024, thanks to strong aluminium prices.
Despite the property slump in China and muted demand in Europe posing downside risks, global aluminium prices are expected to remain robust due to supply risk amid resilient demand from the electric vehicle (EV) and renewable energy sectors and destocking activities reaching their tail-end as aluminium inventory stands at a low level, according to Hong Leong Investment Bank Research (HLIB Research).
In addition, uncertainty over electricity supply in Yunnan, China, is expected to slow capacity growth in China’s aluminium production, the research house said.
As such, HLIB Research projected the new base for aluminium prices to be above US$2,400 per tonne, benefiting Press Metal.
“Press Metal is set to achieve a solid double-digit earnings growth in 2024, which we deem respectable as a Klci-constituent blue chip,” it said.
“With aluminium prices standing above US$2,400 per tonne, we view that its risk and reward profile has turned favourable,” HLIB Research added.
The research house raised its earnings forecasts for Press Metal by 7% for 2024 and 4% for 2025 to Rm1.72bil and Rm1.77bil, respectively, on account of higher assumed aluminium spot prices. It also introduced its 2026 earnings forecast for Press Metal at Rm1.83bil.
Press Metal posted a net profit of Rm1.21bil last year, down from Rm1.41bil in 2022, on lower revenue of Rm13.8bil in 2023 compared with Rm15.68bil in the preceding year.
HLIB Research upgraded its recommendation on Press Metal to “buy”. It also raised its target price for the counter to RM6, from RM4.65 previously, based on a higher forward price-earnings multiple of 28 times, compared with 22.5 times previously.
“We like Press Metal due to its favourable cost structure as the bulk of its energy costs are locked in via a 15 to 25-year power purchase agreements with Sarawak Energy, a solid track record as an investible aluminium proxy in Malaysia and its favourable environmental, social and governance profile as its smelters are hydro powered,” HLIB Research said.
The brokerage revealed that it had revised its aluminium spot prices up to US$2,400 per tonne for 2024 from its earlier projection of US$2,300 per tonne; and US$2,450 per tonne for 2025, up from US$2,350 per tonne. The spot price for 2026 is pegged at US$2,550 per tonne.
“Following the sanctions of Russian metals by the United States and Britain, London Metal Exchange (LME) aluminium prices have found a new base at around US$2,500 per tonne,” it said.
“In our view, sanctions on Russian aluminium by the West do not pose a significant disruption to the global supply-demand balance but merely a readjustment of global trade flows as Russia will push more exports to countries such as China,” it noted, adding that the West would likely plug the import gap from the Middle East, India and South-east Asia.