‘BUY’ RATING ON PRESS METAL STAYS
Company to benefit from continued robust demand for aluminium, says HLIB Research
PRESS Metal Aluminium Holdings Bhd is poised for another record performance in the first quarter of the year, said Hong Leong Investment Bank Bhd (HLIB Research) in a note yesterday.
The research firm projected Press Metal to register a net profit of between RM420 million and RM470 million, up 47 to 64 per cent quarter-on-quarter and 104 to 128 per cent year-on-year.
It said Press Metal was on track to more than double its full-year profit amid elevated aluminium prices, full commissioning of its Phase 3 Samalaju expansion and further contribution from its 25 per cent-owned PT Bintan alumina refinery.
“However, aluminium spot
prices have corrected 21 per cent as the Covid-19 lockdown in China — the largest consuming country — has triggered a possible downward shift in the aluminium consumption curve. Consequently, Press Metal’s share price has corrected 25 per cent in a span of two months.
“Nevertheless, we reckon that the fall in aluminium prices may be temporary amid a structural supply deficit in the near term.
“In our view, the robust demand for aluminium is here to stay as we are just at the beginning of the adoption of electric vehicles and solar panels on the back of rising de-carbonisation efforts globally.”
HLIB Research noted that aluminium supply would continue to face disruption due to the Ukraine-Russia conflict and power rationing, especially on fossil fuel-based power source,
in China.
The research firm has maintained its “buy” call on Press Metal with a lower target price of RM7.59 from RM7.71 previously.
“However, we believe that the valuations are justified due to its favourable cost structure as the bulk of its energy costs is locked in via 15 to 25-year power purchase agreements with Sarawak Energy Bhd, among others,” it added.