• Maintain BUY (TP: RM6.45). Press Metal's 1HFY24 core PATAMI of RM922.4mn met both our in-house and market expectations, accounting for 47.8% and 48.4%, respectively. The Group declared a second interim singletier DPS of 1.75sen, bringing 6MFY24 DPS of 3.5sen. This makes up 30% of our DPS assumption of 11.7sen for FY24F. During 2QFY24, revenue and PBT inched up 9.3% QoQ and 28.3% QoQ, underpinned by higher aluminium prices and robust contribution from the associated companies. We make no changes on FY24-FY25F earnings forecast. We are of the view that moderate aluminium prices since June’24 and rising alumina costs could impact Press Metal's performance in 2HFY24. However, we expect aluminium prices to stay elevated due to slow production recovery outside China and potential US Fed rate cuts. The growing adoption of EVs and broader use of aluminium in various industries should gradually boost global demand. Maintain a BUY call on the stock with unchanged TP of RM6.45. Our valuation is based on the 5- year pre-COVID average PER of 26x, pegged to FY25F EPS of 24.8sen.

• Key Highlight. PT Bintan contribution remains intact, given optimized utilization and high alumina price. For value-added products (VAPs), sales volume improved this quarter, constituting 47% of total sales volume compared to 29% a year ago, with improvements of 5% QoQ and 19% YoY. This was backed by three categories of semi-finished product. For the extrusion segment which contributed 12% to group revenue, profit margins were pressured by rising freight costs and a reduced production rate of solar PV modules. The lower production rate was due to the adoption of a more conservative approach by suppliers arising from uncertainties posted by the increase in US Tariff on solar imports.

• Forecast. Unchanged.

• Outlook. Moderate aluminium price since June’24 and higher trend of alumina prices should be a caution for Press Metal performance in 2HFY24. IAI reported that global aluminium production increased by 3.6% YoY in 2QFY24, primarily driven by China's recovery as Yunnan production improved given improved power availability. However, QoQ growth was modest at 0.9%, with limited production restarts outside of China. We expect aluminium price to remain elevated as production outside of China is resuming slowly and the expected US Fed rate cuts in 2H24 should help support prices following the demand recovery. Overall, 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 - 30 Aug 2024