KUALA LUMPUR: Press Metal Aluminium Holdings Bhd faces pressure on its earnings as aluminium prices fall below US$3,000 per tonne while carbon anode costs climb to a three-year high.
RHB Research attributed the company's nine per cent single-day share price decline to these pressures, alongside concerns over higher US inflation, tighter monetary policy and a stronger US dollar.
Aluminium prices fell to US$2,987 per tonne amid weaker demand sentiment following a sell-off in artificial intelligence-related stocks, expectations of a faster-than-anticipated recovery in the Middle East and the prospect of additional supply from Indonesia.
Meanwhile, carbon anode prices rose six per cent in two weeks to exceed 6,000 Chinese yuan per tonne, partly driven by higher petroleum coke costs.
RHB Research cut its earnings forecasts for the financial years 2026 (FY26) to FY28 by four to five per cent, reflecting higher carbon anode costs and revised foreign exchange assumptions.
Carbon anodes account for an estimated 16 to 19 per cent of Press Metal's cost structure.
The research firm estimated that every CNY100 per tonne change in carbon anode prices could affect annual net profit by two to three per cent.
Despite the cost pressures, RHB Research maintained its "Buy" call on Press Metal but lowered its target price to RM9.30 from RM9.80, implying a potential upside of about 43 per cent.
It said the stock appeared oversold, trading at 18.9 times forecast FY27 earnings and approaching its three-year valuation low.
However, further share price weakness remained possible if aluminium prices continued to decline.
Looking ahead, Press Metal's 80 per cent-owned PT Kalimantan Aluminium Industry project is expected to begin operations in the second quarter of 2027.
The facility is expected to reach full capacity within two to three months of commissioning, with Phase Two targeted to begin towards the end of FY27.
The expansion could bring Press Metal close to full self-sufficiency in alumina, a key raw material for aluminium production, potentially improving its smelting margins.
RHB Research maintained its positive outlook on the company, citing an expected near-term aluminium supply deficit.
However, it identified a sharp decline in aluminium prices and persistently high raw material costs as key risks.
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