Analysts upbeat on Press Metal due to higher Q1 earnings

Analysts have maintained a positive stance on Press Metal Aluminium Holdings due to the outlook for improved aluminium prices driven by China’s demand recovery. (Press Metel web pic)

PETALING JAYA: Analysts maintained their positive stance on Press Metal Aluminium Holdings Bhd (Press Metal) after it posted a 44.7% jump in net profit to RM408.03 million in the first quarter ended March 31, 2024 (Q1 2024) from RM281.97 million in the previous corresponding quarter.

The local aluminium extrusion company’s revenue rose 17.7% to RM3.61 billion from RM3.07 billion previously.

In its research note, Kenanga Research has maintained an ‘outperform’ call on Press Metal as its results beat expectations.

The recommendation is also based on the outlook for improved aluminium prices buoyed by the recovery in demand in China, while geopolitical tensions will cap supply.

“China’s consumption of aluminium has thus far in 2024 surprised to the upside, while globally, the demand for aluminium has been buoyed by renewable energy investments and electric vehicles,” Kenanga said.

Meanwhile, it said the global aluminium supply is expected to remain tight due to more stringent ‘green’ requirements, especially in China, resulting in the permanent shutdown of smelters powered by fossil fuels, especially coal.

“Additional factors include the sanctions on Russian producers by the West and higher tariffs on China’s imports by the US,” it added.

Kenanga also raised the target price (TP) to RM6.35 from RM4.90.

Meanwhile, Hong Leong Investment Bank Bhd maintained a ‘buy’ call with a higher TP of RM6.51 as it opined that Press Metal was poised for record-high earnings in the financial year 2024 (FY2024) in anticipation of stronger quarters ahead due to elevated aluminium spot price.

“With aluminium price standing above US$2,500 (RM11,768.90), we view that its risk and reward profile remains favourable,” it said.

On a similar note, Maybank Investment Bank Bhd upgraded Press Metal to a ‘buy’ call from ‘hold’ with a higher TP of RM6.10 from RM4.84 per share as the aluminium producer’s Q1 2024 results beat expectations.

“We had initially estimated core earnings to range between RM315 million and RM365 million.

“We believe that the key variance against our forecasts was due to an increase in hedging ratios at higher prices, which resulted in higher all-in realised price in the quarter under review,” it added.

As at 12.20pm, Press Metal’s share price was down by 2 sen or 0.36% at RM5.57, giving the company a market capitalisation of 45.89 billion.


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