Maybank IB has introduced its FY24-26E net profit forecasts for PMETAL by -8%/-7%/-7% respectively to mainly account for higher opex & logistics costs, but partially mitigated by higher MJP premiums. With that, the house TP for PMETAL is lowered to MYR4.84 (from MYR5.00) based on a rolled-over FY25E PER of 25x (unchanged). We peg TP to -1SD to its 5-year mean PER of 32x, largely reflecting our expectations of a still subdued spot aluminium price environment over the medium term. The house calling maintaining its HOLD call on the stock.
Expecting a flattish quarter in 1Q24E
PMETAL’s 1Q24E result is tentatively scheduled for release at end-May. Maybank IB said it expects core earnings for 1Q24E at MYR315m-365m (4Q23: MYR328.4m), barring any unforeseen swings in its cost structure. This is estimated from a slightly higher QoQ LME aluminium spot price of average USD2,243/tonne in 1Q24 (4Q23: USD2,228/tonne; 1Q23: USD2,439/tonne).
The 1Q24E core net profit estimate implies that PMETAL’s earnings would come in at 22-25% of our revised FY24E full-year forecast and 21-24% of consensus’s full-year estimates of MYR1,510m. BI: Spot price uptick in 2024 before declining in 2025 Bloomberg Intelligence (BI) views that the global aluminium market’s surplus might narrow in 2024 before widening again in 2025 as Indonesia adds new smelting capacity totaling 1m tonnes from Adaro and Nanshan Aluminium. BI forecasts demand growth from China and the rest of the world could both accelerate to 2.8% and 2.6% in 2024, with EV production
and solar-capacity expansion being key boosters. Potential US interest rate cuts in 2024 may also create more demand for construction, which accounted for 22% of 2023 global aluminium demand.
Valuation is fair, growth prospects priced in
The house’s revised FY24-26E assumptions are: i) avg. LME aluminium spot prices of USD2,325/2,350/2,400/tonne; and ii) hedges of 30% @ USD2,500/ tonne for FY24E, 20% @ USD2,600/tonne for FY25E and 5% @ USD2,600/ tonne for FY26E. This would bring PMETAL’s earnings growth to 22% YoY in FY24E and 5% in FY25E before tapering off in FY26E. Maybank IB believes FY24E-25E growth prospects are priced in as PMETAL is trading at c.25x FY24E-25E PER.
