KUALA LUMPUR (Oct 9): Press Metal Aluminium Holdings Bhd (KL:PMETAL) Southeast Asia’s largest aluminium smelter by capacity is expected to post double-digit earnings growth in FY2025 stable aluminium prices, as global monetary policies ease and China’s economy recovers, said Hong Leong Investment Bank (HLIB).

The research house expects stable aluminium prices, alongside an expected drop in alumina prices, providing support to the group’s margins going into 2025.

However, near-term challenges persist, with the company likely to report weaker earnings for 3Q2024, impacted by a 5.5% drop in average aluminium prices to US$2,385/MT (metric tonne) and a 18% increase in alumina prices.

The house expects Press Metal’s 3Q2024 earnings to come in between RM325 million and RM375 million, representing a 27% to 37% quarter-on-quarter (q-o-q) drop.

Nevertheless, year-on-year (y-o-y), the numbers are expected to grow by 6% to 22%, coupled with the appreciation of the ringgit against the US dollar.

In light of these factors, HLIB has trimmed its FY2024, FY2025, and FY2026 forecasts by 16%, 7%, and 7%, respectively.

“All in, we trim our FY2024/FY2025/FY2026 forecasts by -16%/-7%/-7%, as we impute a stronger RM/US dollar assumption, higher alumina price assumptions, and 3% capacity reduction in 2024, due to the fire incident in its phase 3 smelter,” HLIB said.

Meanwhile, HLIB maintained its “buy” call with a lower target price (TP) of RM6.07 (from RM6.51), citing the company’s favourable cost structure with long-term energy contracts and a strong environmental, social, and governance (ESG) profile.

The house said that as most of Press Metal’s smelters are hydro-powered, the company is well-positioned to benefit from growing interest in green metals.

At the close of trade, the counter was down 19 sen or 3.75% at RM4.88, giving the company a market capitalisation of RM40.21 billion, with trading volume totalling 5.47 million shares.