Hong Leong Investment Bank forecasts increased earnings for Press Metal amid expected aluminium price surge

Hong Leong Investment Bank Bhd (HLIB) has reportedly shared higher earnings forecasts for Press Metal Aluminium Bhd for FY2024 and FY2025. The investment bank has projected that Press Metal's earnings will increase by 7 per cent and 4 per cent, respectively, in the said years on account of anticipated increased aluminium spot price. 

The investment firm has also upgraded the stock to a "Buy" rating with a higher target price of RM6 from RM4.65 previously. It forecasts RM1.8 billion of Press Metal's earnings for FY2026. 

Hong Leong Investment Bank believes that despite the muted demand for aluminium from the building & construction sector, aluminium prices will remain steady, supported by resilient demand growth from the new electric vehicles and renewable energy sectors. Coupled with this, weaker supply due to a low inventory level and slow production growth because of uncertain electric supply in Yunnan will bolster the aluminium prices in China.

In addition, due to the Russian metal sanctions by the United States and the United Kingdom, the LME aluminium price has found a new base at US$2,500 per tonne. 

About Russian aluminium sanctions, HLIB stated, "In our view, the Russian aluminium curb by the West does not pose a significant disruption to the global supply-demand balance but merely a readjustment of global trade flows as Russia will push more exports to countries such as China."

HLIB added, "Meanwhile, the West will likely plug the import gap from Middle East, India and Southeast Asia. Before these formal sanctions, Russian aluminium already made up the lion's share of China's imports since the outbreak of Russia-Ukraine war in 2022."

For FY2023, Press Metal declared a full-year revenue of RM13.8 billion, down by 12 per cent from the previous year, while net income decreased by 14 per cent to RM1.22 billion. In tandem with lower revenue, profit margin also dipped over the year from 9 per cent to 8.8 per cent.