KUALA LUMPUR: Press Metal Aluminium Holdings Bhd is expected to record double-digit earnings growth in the financial year 2025 (FY25), said Hong Leong Investment Bank Bhd.
The bank said this will be backed by a stable aluminium price due to easing monetary policies by major central banks and gradual economic recovery in China, as well as an easing aluminium price in 2025.
"We like Press Metal due to its favourable cost structure as bulk of its energy costs are locked in via 15-25 year PPA, solid track record as an investible aluminium proxy in Malaysia, and favourable environmental, social, and governance (ESG) profile as its smelters are hydro powered," it said.
Meanwhile, HLIB also notes that alumina prices were up 18 per cent quarter-on-quarter (QoQ) in the third quarter (Q3) of 2024.
It said this is driven by persistently strained alumina supply due to output cuts by Alcoa and Rio Tinto's refineries in Australia, while previously idled capacity of aluminium refineries in Yunnan is now back in full swing.
"We reckon the higher alumina costs will put further pressure on Press Metal's smelting margins in the second half of 2024 (2H24).
"Additionally, 9.0 per cent of its smelting capacity was burnt in the fire incident at Phase 3 Samalaju in mid-Sep.
"As the repair works would take about four months, this will translate to a 3 per cent sales volume loss in FY24," it said.
All in all, HLIB has trimmed its FY24/25/26f forecasts by -16 per cent/-7 per cent/-7 per cent as it imputes a stronger ringgit/US$ assumption, higher alumina price assumptions, and capacity reduction in 2024 due to the fire incident in its Phase 3 smelter.
"Post adjustments, we keep Buy call on Press Metal with a lower target price of RM6.07 from RM6.51," it added.