• Press Metal’s (PMAH) 2020 core net profit fell by a marginal 1.4% yoy to RM492.8m attributable to weaker aluminium prices in 1H20
• Overall, the results were above market and our expectations – making up 110% of street and 118% of our full-year forecasts respectively
• We raise our 2021-22E earnings by 10-11% as we expect stronger earnings performance stemming from rising aluminium prices and demand. Maintain our BUY call with a higher target price of RM10.73, based on 2021E PER of 40x

2020 core net profit decreased by 1.4% yoy to RM492.8m; above expectations

Press Metal’s 2020 headline net profit decreased 3.5% yoy to RM457.2m. This was attributable to a 14.4% decline in revenue to RM7.5bn due to weaker aluminium prices in 1H20 and a RM22.1m early-redemption expense for its US$ bonds recognised in 2020. Meanwhile, EBITDA margin improved by 2.4ppt yoy to 16.4% due to lower operating expense incurred on the back of lower alumina and carbon anode raw-material costs. Excluding one-off items, core net profit came in at RM492.8m, a marginal 1.4% decline yoy. Core earnings made up 110% of street and 118% of our full-year forecasts respectively. The variance to our forecast was due to higher-than-expected aluminium prices. In tandem with the lower earnings, 2020 DPS was reduced to 4.25 sen (vs 2019 DPS of 5.0 sen).

Higher ASP Supports Core Net Profit Growth of 40.8% Qoq in 4Q20

Sequentially, 4Q20 core net profit increased 40.8% qoq to RM176.8m due to higher aluminium average selling prices (ASP) during the quarter. In tandem, EBITDA margin was also higher by 0.6ppt qoq to 17.5%.

Maintain Our BUY Call With a Higher TP of RM10.73

We raise our 2021-22E earnings by 10-11% as we expect stronger performance from PMETAL stemming from rising aluminium prices and demand, which should coincide with commissioning of its Phase 3 Samalaju plant. We expect better profit margin from transport cost savings with the commissioning of Phase 1 PT Bintan in 1Q21, as well as lower alumina and carbon anode costs. We raise our ASP assumptions for 2021-2022E to US$2,000/2,050 per tonne (from US$1,950/2,000) on the back of a faster recovery in LME prices. All in, we maintain our BUY call on PMETAL with a higher target price of RM10.73, based on an unchanged 2021E target PER of 40x.

Source: Affin Hwang Research - 25 Feb 2021