PA Resources Berhad (PA, 7225) is a prominent aluminium manufacturer and exporter with a diversified product portfolio that includes aluminium billets, coils, sheets, and fabricated products. Recently, PA secured a favourable outcome in an anti- dumping proceeding initiated by the U.S. Department of Commerce, receiving a zero-tariff rate. This development significantly enhances its competitive edge within the North American market. We maintain our FY6/25 and FY6/26 earnings forecasts at RM57.7m and RM63.8m respectively. BUY with a TP of RM0.50 based on 13x PER (3 years average) over FY25 EPS.

A major breakthrough for PA is the recent zero-tariff ruling from the U.S. Department of Commerce following an anti-dumping investigation. This favourable decision not only eliminates a significant cost barrier but also enhances the company’s competitiveness in one of its largest export markets. This development marks as a key driver for future growth trajectory hence placing PA in an enviable position.

Meanwhile, PA is increasing its production capacity to meet the growing demand from sectors like automotive and construction. Currently operating at 3,200MT/month, PA is upgrading its existing fabrication line and is planning a phased capacity expansion, which will more than double its output over the next 18 months. Phase 1 of the new expansion will add between 2,000/2,500MT of capacity, with the total capacity across all phases expected to reach 7,000MT. This strategic expansion enables PA to better serve the increasing market demand.

The global shift towards sustainable materials, particularly in the construction, automotive, and renewable energy sectors, bodes well for PA as aluminium’s lightweight and recyclable properties make it a preferred choice for green construction projects and electric vehicle manufacturing, creating long-term demand growth.

Additionally, China’s anticipated fiscal stimulus measures to boost infrastructure projects present further opportunities for PA. The company’s strategic positioning and partnerships in Asia further enhances its market penetration amid the increasing demand within the region.

PA’s balance sheet is solid, with a net cash position of RM60.7m, providing ample flexibility for future investments and expansion plans. This strong financial foundation allows the company to capitalise on growth opportunities while maintaining a conservative risk profile.

Source: Rakuten Research - 10 Oct 2024

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