• Overview. Press Metal Aluminium Berhad (PMETAL) 3QFY22 core net profit  and revenue tanked by 21.9% QoQ and 4.1% QoQ, no thanks to lower  contribution from refinery segment, a pullback in aluminium price as well as  higher operating cost. Nevertheless, core net profit and revenue on yearly  basis improved by 13.9% YoY and 33.2% YoY respectively thanks to: i) massive  contribution from upstream segment, ii) stronger USD and iii) higher  production arising from full commissioning of Samalaju Phase 3. All in all, these pushed YTD core net profit and revenue to soar by 54.7% YoY and  54.4% YoY respectively.

• Key highlights. Management highlightsthat geographical revenue during this  quarter mainly came from Asia Pacific (40%) and followed by Europe and  South East Asia (30% respectively). Alumina spot prices in 3QFY22 has  corrected by 44% though a marginal decline of 0.8% for carbon anode spot  price over the quarter. Also, realised aluminium price has eased to  USD2,400/tonne during 3QFY22 compared to USD2,600/tonne in 2QFY22. On  the other hand, associate income surged by 74.9% QoQ largely due to higher  earnings from PT Bintan.

• Against estimates: Inline. 9MFY22 PATAMI of RM1.2bn was in line with our  and consensus’ estimates, making up 70.5% and 72.4% of full-year forecast.

• Dividend. The Group declared a third interim DPS of 1.75 sen, bringing yearto-date FY22 DPS of 5sen. This translates into a 1% dividend yield.

• Outlook. Going forward, low inventory level is likely to persist owing to  production cut from some European region following high energy cost and  power shortages coupled with soft demand in aluminium arising from  recession fears. Current supply tightness is consistent with supply cut from  Europe and potential ban on Russia’s production though this could push  aluminium price higher. We pencil aluminium spot price assumption of  USD2,500-USD2,650/tonne for FY22F-FY24F (YTD 2022: USD2,729/tonne).

• Earnings revision. No change to our FY22F-FY24F earnings forecast.

• Our call. Maintain a BUY call on the stock with an unchanged TP of RM7.05.  Our valuation is based on average 5-year historical PER of 30x, pegged to  FY23F EPS of 23.5sen. Our target price offers a solid upside potential of  46.9% and the recent drop in share price gives investors an opportunity to  accumulate on the stock.

Source: BIMB Securities Research - 30 Nov 2022