PETALING JAYA: While Hong Leong Investment Bank (HLIB) remains constructive on Press Metal
Aluminium Holdings Bhd’s underlying fundamentals, it says the market has largely priced in the group’s status as a beneficiary of the Middle East conflict – including expectations of supernormal profits in the coming quarters amid elevated aluminium prices.
With aluminium prices moderating and the aluminium market likely to tilt into a slight surplus in 2027, the risk-reward profile appears balanced at current levels, it said.
“Hence, we keep our ‘hold’ rating but with a slightly lower target price of RM8.34, from RM8.77, based on a five-year mean price earnings of 25 times pegged to financial year ending Dec 31, (FY26) earnings per share.”
HLIB also trimmed its FY26, FY27 and FY28 forecasts by 5%, 2% and 3%, respectively, after lowering its aluminium price assumptions.
Citing S&P Global, it said the London Metal Exchange’s (LME) alumina prices remained subdued at slightly over circa US$300 per tonne, which is supportive of healthy aluminium smelting margins.
Despite a persistent alumina glut following demand disruptions in the Middle East, it believes alumina prices are nearing a floor, underpinned by potential bauxite export controls in Guinea, aluminium capacity expansions in Indonesia and gradual recovery in Middle Eastern consumption amid aluminium capacity restoration efforts.
HLIB said the aluminium market is likely to remain in deficit at circa two million tonnes throughout 2026, as conflict-related disruptions removed around three million tonnes of supply from the market.
Following the initial US-Iran peace deal, LME aluminium prices came under pressure, retreating from the recent peak of US$3,800 per tonne to now hovering around US$3,200 per tonne.
“Although tensions remain volatile, we expect aluminium prices to hold steady as the market is increasingly pricing in a surplus scenario for 2027 amid the anticipated addition of circa two to three million tonnes of new supply from Indonesia and India, alongside capacity resumptions at Middle East smelters, in our view,” it added.
The hawkish US Federal Reserve could also weigh on base metal prices, HLIB said, but added the ongoing supply deficit in 2026 and lingering concerns over the continued Strait of Hormuz closure should set a floor for aluminium prices.
HLIB said it was anticipating Press Metal’s 2Q26 core earnings to come in at the range of RM750mil to RM800mil, which will bring its first half 2026 tally to RM1.357bil to RM1.407bil (39% to 45% year-on-year), accounting for 47% to 49% of its FY26 forecast. At last look, Press Metal was at RM7.87.
