PETALING JAYA: Press Metal
Aluminium Holdings Bhd is expected to register strong revenue and earnings growth next year.
This is based on the recent announcement of its results for the first nine months of the year, which beat most analysts expectations.
Analysts said this was a good indicator for the year ahead for the company.
According to Hong Leong Investment Bank Research (HLIB Research), Press Metal may be able to record double-digit earnings growth in financial year 2025 (FY25).
The aluminium extrusion company is expected to be supported by stable aluminium prices due to anticipated easing of monetary policy by major central banks and gradual economic recovery in China, as well as a potentially lower alumina price next year.
Currently prices for alumina, the raw material for producing aluminium, have been near an all-time high and this reduced the profit margins of aluminium smelters for as alumina price gains continue to outpace aluminium.
HLIB Research noted alumina prices had rallied to over US$750 per tonne as of end-November from US$500 per tonne in June. This was driven by worsening bauxite crunch due to suspension of shipments by Guinea’s customs authorities.
The research house also likes Press Metal for its favourable cost structure as the bulk of its energy costs are locked in through a 15 to 25 year purchase agreement.
It also has a solid track record as a proxy investment for aluminium in Malaysia.
And since its smelters are powered by hydro-generated electricity, the company also features a favourable environmental, social and governance profile, the research house noted.
“We believe alumina prices will peak by early-2025 as new capacities come online next year, primarily in Indonesia and India.
“We raise our FY24, FY25 and FY26 forecasts by 12%, 15% and 16%, respectively,” HLIB Research said.
It maintained its buy call with a higher target price of RM6.21 from RM6.07 previously.
RHB Research, which maintained a “buy” call on Press Metal, also highlighted its cost advantages, global demand being boosted by potential interest rate cuts, and growing awareness about smelters with lower-carbon footprints.
However, the potential risks in the company’s outlook include a plunge in aluminium prices, sharp weakening of the US dollar, elevated raw material prices, or a slowdown in the global economy, which would undermine primary aluminium demand.
“We lift our FY24 to FY26 earnings forecasts by 14.4%, 12.2% and 7.5%, respectively, after revising our associate contribution and cost assumptions, as well as US dollar to ringgit assumptions to RM4.30 and RM4.20 per US dollar (from RM4 and RM4.10) for the FY25 to FY26 period,” the research house said.
RHB Research has a target price of RM6.39 on Press Metal.
