Hong Leong Investment Bank projects Press Metal’s Q2 earnings to record a double-digit growth

Hong Leong Investment Bank (HLIB) reportedly expects Press Metal Aluminium Holdings Bhd’s core earnings to increase by up to 20 per cent Q-o-Q and 60 per cent Y-o-Y in the second quarter of CY2024, led by higher prices of the metal.

According to Hong Leong’s projection, the company’s Q2 earnings will range between RM480 million and RM500 million, resulting in the first half’s earnings surging by 51 per cent to RM897-RM917 million.

This positive forecast is based on robust prices of global aluminium on LME, especially during the end of May, reaching RMB 2,677 per tonne on May 31, said HLIB, maintaining a “buy” call on Press Metal with an unchanged target price of RM6.51.

Supported by the strong aluminium prices, HLIB considers Press Metal’s risk and reward profile favourable and is set to achieve a double-digit earnings growth through the financial year ending December 31, 2024.

The research firm noted that Press Metal also had a better hedging position at US$2,600 in Q2 CY2024 versus US$2,300 in Q2 FY2023.

Simultaneously, HLIB flagged that alumina price, one of the key raw materials needed for aluminium smelting, is on the rise. Alumina price increased by 14 per cent over the quarter in Q2 FY2024 due to tightened supply because of Alcoa’s Kwinana refinery suspension of 2.2 million tonnes capacity and Rio Tinto’s force majeure declaration on its supplies due to natural gas shortage.

Nonetheless, HLIB expects decent Q2 earnings for Press Metal, generating an annual net profit of RM1.9 billion at the end of FY2024 versus RM1.2 billion in the previous year.

Ten of the twelve analysts tracking Press Metal have announced “buy” calls, while the remaining two labelled “hold” ratings with a 12-month average target price of RM6.30.

In the first quarter of FY2024, Press Metal’s net profit was RM408.4 million, compared to RM281.97 million during the corresponding period of the previous year. That was a whopping rise of 44.84 per cent, thanks to higher sales volume and a stronger US dollar. Revenue increased by 17 per cent Y-o-Y to RM3.62 billion, from RM3.07 billion.