• Maintain BUY (TP: RM6.45). Press Metal 1QFY24 core PATAMI of RM425mn exceeded our in-house expectation (32.2%) but within consensus estimates (26.5%). The higher-than-expected deviation was spurred by higher sales volume on the back of strengthening of US Dollar as well as better contribution from associate, particularly PT Bintan. The Group declared a 1st interim single-tier dividend of 1.75 sen/share for FY24, representing 15.2% of our FY24 forecast of 11.1 sen/share. In 1QFY24, revenue increased by 2.4% QoQ and PBT rose by 27.2% QoQ, driven by higher aluminium prices and lower input costs, leading to improved margins. We increased FY24-FY25F earnings forecast by 38-46% to account for better margin from its associate. We also introduced an sFY26F earning forecast of RM2.1bn, which translates into a 13.6% net profit margin. We expect global demand to recover in 2H2024 driven by easing inflationary pressures, increased adoption of electric vehicles (EVs), and broader industrial use of aluminium. Maintain a BUY call on the stock with higher TP of RM6.45 (RM5.43 previously) as we rolled over our valuation to FY25F. Our valuation is based on the 5-year pre-COVID average PER of 26x, pegged to FY25F EPS of 24.8sen.

• Key Highlight. Associate contribution from PT Bintan accounts for 16% of PBT, driven by its cost-effective measures and highly efficient platform, resulting in encouraging returns. In the midstream segment, VAPs accounted for 46% of the volume sold in 1Q24, marking a 4% YoY improvement which is driven by all three categories of semi-finished product. In the downstream extrusion segment, sales volume declined QoQ due to reduced activities during the festive season. However, management has initiated new production of 30k p.a. to meet demand from new clients in China, America, and India, with expectations to run at full capacity by 3QFY24.

• Outlook. On the supply side, China's Yunnan resumed production due to improved power availability but global production decreased by 1.2% QoQ. This overall supply shortfall may threaten inventory levels and potentially drive aluminium prices higher, in our view. However, we expect global demand to recover in 2H2024 with easing inflationary pressures, boosting consumption growth. The growing adoption of electric vehicles (EVs) and increased use of aluminium in various industries are expected to gradually boost global aluminium demand. We forecast aluminium spot prices to be USD2,550-USD2,650 per tonne for FY24-FY26F

Source: BIMB Securities Research - 31 May 2024