• Maintain BUY (TP: RM6.45). Press Metal's 9MFY24 core PATAMI of RM1.4bn was within our in-house estimates but exceeding market expectations, making up 72.9% and 85.1% respectively. The group declared a 3rd interim single-tier DPS of 1.75sen, bringing 9MFY24 DPS of 5.25sen and makes up 44.9% of our FY24F DPS of 11.7sen. We believe the Chinese government's cancellation of the aluminium export tax rebate creates opportunities for Press Metal, especially in markets previously dominated by China. While this could disrupt supply chains and raise aluminium and alumina prices, the JV with PT Kalimantan Alumina Nusantara (KAN) ensures a competitive alumina supply, mitigating cost impacts and supporting margin stability. Overall, the growing adoption of EVs and broader use of aluminium in various industries should gradually boost global demand. Maintain a BUY call with unchanged TP of RM6.45, based on 5-year pre-COVID average PER of 26x, pegged to FY25F EPS of 24.8sen.

• Key Highlight. 3QFY24 revenue and core PATAMI declined by -4.5% and -3.4% QoQ, respectively, due to lower aluminium prices. However, for 9MFY24, both revenue and core PATAMI surged by +10.5% and +56.6% YoY, driven by higher aluminium prices, stronger sales volumes, a stronger USD, and improved contributions from its associate, PT Bintan. In the upstream segment, the JV with KAN will secure more than 75% of Press Metal's alumina needs, including Phase 1 capacity from KAN, estimated at 800k-960k MT based on its equity stake. Besides, for value-added products (VAPs), 50% of the volume sold in 3Q24 came from VAPs, marking improvements of +2% QoQ and +23% YoY, mainly from wire rods and billets. For downstream segment, extrusion revenue increased by +6.4% QoQ, supported by higher sales volumes despite a decline in LME prices and corresponding unit prices, reflecting strong demand and solid market positioning for Press Metal’s products.

• Outlook. The Chinese government's cancellation of the aluminium export tax rebate is expected to benefit Press Metal, opening up market expansion in regions previously dominated by Chinese exports, potentially shifting up to 5mn tons of supply outside China. While this may disrupt supply chains and push aluminium and alumina prices higher, the JV in KAN should help mitigate cost increases by securing a competitive alumina supply. Overall, the growing adoption of EVs and rising aluminium use in industries such as solar are expected to drive steady global demand growth. We forecast aluminium spot prices to range between USD 2,550 and USD 2,650 per tonne for FY24-FY26F.

Source: BIMB Securities Research - 2 Dec 2024