KUALA LUMPUR (Jan 9): Maybank Investment Bank (Maybank IB) expects a flattish quarter (4Q2023) for Press Metal Aluminium Holdings Bhd, while maintaining a cautious outlook on the challenging aluminium market.

In a results preview on Tuesday, Maybank IB said Press Metal’s anticipated 4Q2023 results will be released at the end of February, and said it expects Press Metal’s core earnings for 4Q2023 to range from RM300 million to RM350 million, barring any unforeseen swings in cost structure.

This is estimated from a slightly higher London Metal Exchange aluminium spot price of average US$2,228 per tonne in 4Q2023, compared to US$2,203 per tonne in 3Q2023, it said.

“Our 4Q2023 core net profit estimate implies a FY2023 cumulative earnings of RM1,214 million to RM1,264 million, which would come in at 98%-102% of our revised FY2023E full-year forecast and consensus’ RM1,242 million,” it said.

However, the research house stated that the aluminium outlook remains challenging, with Bloomberg Intelligence (BI) forecasting unexciting demand growth of 1% for 2023, 3% for 2024, and 2% for 2025.

The global market is expected to experience a small surplus (less than 0.5 million tonnes) annually for 2023–2025E, primarily driven by global efforts to reduce greenhouse gas emissions, boost electric vehicle penetration, and be lightweight across all vehicle intensities, it said.

Besides, the research house stated that its projection of a 33% core net profit growth in FY2024E has been priced in, with Press Metal currently trading at a multiple of at least 24 times its estimated earnings for FY2024E.

Overall, Maybank IB maintained a “hold” recommendation on Press Metal but raised its target price to RM5 from RM4.90, attributed to an increase in the company’s net profit of 6% for 2023, 3% for 2024, and 3% for 2025E.

The net profit projection is to account for slightly higher average aluminium spot price assumptions and the increase in forward hedges, the research house added.

At the time of writing on Tuesday, Press Metal was traded at RM4.92 per share, translating into a market capitalisation of RM40.54 billion.