The aluminium sector is expected to experience continued positive momentum driven by narrowing surplus and increasing demand, as reported by RHB Investment Bank (RHB).

This outlook was underpinned by rising aluminium prices and strong growth momentum forecasted into 2Q24, with an upgrade to a BUY rating for Press Metal from Neutral.

RHB raised its target price for Press Metal to MYR6.67, reflecting an 11% upside potential, due to the company's expected double-digit year-on-year bottom line growth supported by increased aluminium prices and spot premiums. The report transferred coverage of Press Metal to analyst Cindy Lee, who cited the company's favourable positioning amidst rising demand and a narrowing global aluminium surplus.

The bank highlighted a predicted narrowing aluminium surplus and a potential shift to a deficit by 2025, driven by slow capacity expansions in Indonesia, increased demand from green sectors such as solar and electric vehicles. This supported the upward revision of their FY24F-26F aluminium price forecasts to USD2,350, USD2,400, and USD2,500 per tonne, respectively.

The analyst noted that Press Metal has hedged its aluminium average selling prices (ASPs) at favourable rates for the coming years, which contributed to increased earnings projections by 6-18%. The bank also included an 8% ESG premium in its target price, indicating Press Metal's commitment to lower-carbon footprint smelting.

The outlook for the aluminium market remained optimistic, supported by demand from the EV and solar sectors, global trade recovery, and increased awareness of environmental impact. Investors were encouraged to consider Press Metal for its growth potential and strategic positioning in a strengthening aluminium market.