KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) has raised its earnings forecast for Press Metal Aluminium Bhd by seven per cant and four per cent for financial years 2024 (FY24) and FY25 respectively on account of higher assumed aluminium spot price.
It also introduced FY26 forecasts at RM1.8 billion.
The firm upgraded the stock to a "Buy" rating with a higher target price of RM6 from RM4.65 previously.
IAlthough demand has been somewhat dragged by the property slump in China and muted demand in Europe, HLIB believes that the current aluminium price will remain supported by resilient demand growth from the NEVs and renewable energy sectors, destocking activities reaching tail-end as aluminium inventory remains at a low level and electricity supply uncertainties in Yunnan slowing production growth in China.
It added that following the sanctions of Russian metals by the United States and United Kingdom, LME aluminium price has found a new base at US$2,500.
"In our view, the Russian aluminium curb by the West does not pose a significant disruption to the global supply-demand balance but merely a readjustment of global trade flows as Russia will push more exports to countries such as China.
"Meanwhile, the West will likely plug the import gap from Middle East, India and
Southeast Asia. Before these formal sanctions, Russian aluminium already made up the lion's share of China's imports since the outbreak of Russia-Ukraine war in 2022, according to Bloomberg," it said.
Post-sanctions, HLIB believes the trend will accelerate further as China soaks up excess Russian metals.
