KUALA LUMPUR: Weaker aluminium prices could continue to weigh on Press Metal
Aluminium Holdings Bhd's prospects following the group's 2019 earnings decline, says Affin Hwang Capital research.
"While we believe its capacity expansion will drive the group’s earnings growth in 2020-21E, the uncertainties in the global aluminium market will continue to weigh down aluminium prices, posing downside risk to the group’s earnings," it said.
The research house cut its FY20-21 earnings forecast on the group by 3-6% give the downward pressure on aluminium prices and after factoring in lower associates' contribution.
Coincidingly, it cut its target price on the stock to RM5 and downgraded its call to hold.
According to Affin Hwang, the coronavirus outbreak since January has temporarily disrupted global economic activity will put downward pressure on aluminium prices, although it expects prices to recover once the situation improves.
It cut its 2020 aluminium price assumption to US$1,850 per metric tonne while maintaining its 2021 aluminium average selling price assumption at US$1,900 per metric tonne.
In its recently announced 2019 results, Press Metal posted net profit of RM471mil, which was 24% lower from the previous year due to lower aluminium selling prices and higher alumina costs.
Ebit margin was lower at 9.6% as compared to 11.3% in 2018, mainly due to higher alumina costs caused by the disruption in global alumina supply.
Excluding one-off items, core net profit came in 18% lower y-o-y at RM492mil, which was largely within Affin Hwang's and consensus estimates.
Aluminium Holdings Bhd's prospects following the group's 2019 earnings decline, says Affin Hwang Capital research."While we believe its capacity expansion will drive the group’s earnings growth in 2020-21E, the uncertainties in the global aluminium market will continue to weigh down aluminium prices, posing downside risk to the group’s earnings," it said.
The research house cut its FY20-21 earnings forecast on the group by 3-6% give the downward pressure on aluminium prices and after factoring in lower associates' contribution.
Coincidingly, it cut its target price on the stock to RM5 and downgraded its call to hold.
According to Affin Hwang, the coronavirus outbreak since January has temporarily disrupted global economic activity will put downward pressure on aluminium prices, although it expects prices to recover once the situation improves.
It cut its 2020 aluminium price assumption to US$1,850 per metric tonne while maintaining its 2021 aluminium average selling price assumption at US$1,900 per metric tonne.
In its recently announced 2019 results, Press Metal posted net profit of RM471mil, which was 24% lower from the previous year due to lower aluminium selling prices and higher alumina costs.
Ebit margin was lower at 9.6% as compared to 11.3% in 2018, mainly due to higher alumina costs caused by the disruption in global alumina supply.
Excluding one-off items, core net profit came in 18% lower y-o-y at RM492mil, which was largely within Affin Hwang's and consensus estimates.
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