Self-sufficiency in alumina profit driver for Press Metal

PETALING JAYA: The recent sell-off in the shares of Press Metal Aluminium Holdings Bhd offers an attractive opportunity for investors to accumulate, as the group’s fundamentals remain largely intact, says RHB Research.

The research house attributes the 9% decline in Press Metal’s shares in a single day to aluminium prices falling below US$3,000 per tonne, carbon anode costs reaching multi-year highs and the higher US consumer price index inflation, which increased the risk of an October US Federal Reserve rate hike and potentially a stronger US dollar in the near term.

RHB Research said in a note to clients that a further near-term correction cannot be ruled out if commodity prices continue to weaken.

“Based on our estimates, every US$100 per tonne change in aluminium average selling prices or ASPs will affect our earnings by 4% to 6% per annum.”

Meanwhile, RHB Research estimated that carbon anode accounts for 16% to 19% of Press Metal’s cost structure and every Chinese yuan 100 per tonne change will impact Press Metal’s bottom line by 2% to 3% per annum.

It has also adjusted the group’s carbon anode costs accordingly. Consequently, Press Metal is now approaching its three-year low, implying a share price of RM6 to RM6.30 per share.

At the previous trough, aluminium prices ranged between US$2,300 and US$2,500 per tonne, while carbon anode prices were around 5,000 to 5,200 yuan per tonne.

“As such, we believe the stock is oversold and recommend investors to gradually accumulate at current levels,” added RHB Research.

The research house has trimmed Press Metal’s earnings by 4%, 5% and 5% for financial year 2026 (FY26), FY27 and FY28 after increasing carbon anode costs and updating its latest foreign-exchange assumptions.

However, it has kept a “buy” call with a lower target price of RM9.30 from RM9.80 earlier. “The premium is justified, in our view, on near-term supply deficit, while aluminium prices continue to remain elevated for now,” it noted.

On a more positive note, Press Metal’s 80%-owned PT Kalimantan Aluminium Nusantara is expected to start commissioning in the second quarter of FY27, with full capacity estimated to be achieved within two to three months thereafter.

Phase 2 meanwhile, is expected to be underway towards the end of FY27, potentially bringing Press Metal’s alumina self-sufficiency to almost 100%.

“We believe this will be a major catalyst for the stock, as it will materially expand its smelting margins,” RHB Research noted.

The key risks to RHB Research’s call include a plunge in aluminium prices and elevated raw material prices.