Press Metal Aluminium Holdings Bhd is expecting no major earnings surprise in 3Q23 earnings lowered, according Maybank Investment Bank Berhad (Maybank IB).
In its notes today (Oct 24), the research house said post-transfer of Press Metal Aluminium coverage, it cut its FY23-25E net profit forecasts by -18%, -5%, -15% with average aluminium spot price assumptions of USD 2,200/2,300/2,350 per tonne respectively.
Following the negative EPS revision, Maybank IB downgrades Press Metal to HOLD with a lower TP of MYR4.90 from BUY with a TP of MYR5.40 previously.
The research house said that it is not expecting any major earnings surprise in 3Q23.
“Press Metal’s 3Q23 result is tentatively scheduled for release at the end of Nov 2023. We expect core earnings for the quarter to come in around MYR300m-350m (2Q23: MYR305.8m), barring any unforeseen swings in cost structure.
“This is estimated from a marginally lower LME aluminium spot price average of USD2,203 per tonne in 3Q23 (vs. USD2,283 per tonne in 2Q23; and USD2,357 per tonne in 3Q22)
“However, this will offset by slightly higher associate earnings from 25%-owned PT Bintan, due to higher alumina sales volume from its Phase 2 alumina expansion project (additional 1m tonnes which fully commissioned in mid-2Q23).
“Our 3Q23 core net profit estimate implies 9M23 cumulative earnings of MYR889 to MYR939 million, for example, 74-78% to our revised FY23E full-year forecast but lower than consensus’ MYR1,335 million.
Maybank IB notes that the aluminium outlook to remain challenging as Bloomberg Intelligence (BI) expects aluminium demand growth to remain unexciting at +1%/3%/2% for 2023-2025E respectively.
“Growth will be primarily driven by the global GHG emission reduction drive which will boost EV penetration and light-weighting across all vehicle intensities, compensating for lacklustre demand from the global construction sector.
“BI also forecasts the global aluminium market to swing into a small surplus (where global supply exceeds global demand) of <0.5m tonnes annually for 2023-2025E,” the research house said.
It said that Bloomberg expects aluminium prices to average at USD2,100- 2,300/tonne in 2024-2025E (vs. our forecast of USD2,300-2,350).
Hence, Maybank IB lowers TP of MYR4.90 pegs on an FY24E PER of 25x, being -1.5SD to its 5-year (1-year forward) PER mean of 32x, largely reflecting our expectation of more subdued spot aluminium prices into the foreseeable future.
