PETALING JAYA: Press Metal

Aluminium Holdings Bhd could face a more challenging aluminium market from 2027 as a wave of new capacity in Indonesia and elsewhere raises the risk of a global supply surplus, although tight physical supply and elevated regional premiums are expected to support prices in the near term.

In a report, Hong Leong Investment Bank (HLIB) Research forecast earnings to moderate sequentially as the London Metal Exchange (LME) aluminium prices eased to around US$3,200 a tonne, although the sustained main Japanese ports premium of above US$300 a tonne should help cushion the impact.

The research firm projects aluminium prices to remain broadly stable, as tight physical supply is likely to offset the expected resumption of supply from the Middle East and additional production capacity coming onstream in Indonesia and India.

Press Metal reported record core earnings of RM719mil in the second quarter ended June 30, 2026 (2Q26), bringing first half of financial year 2026 (1H26) to RM1,325.8mil. HLIB Research views the results as slightly below its and consensus’ forecasts, with earnings expected to weaken sequentially in 2H26 due to lower LME aluminium prices.

HLIB Research noted that Press Metal’s new alumina refinery in West Kalimantan, operated through PT KAN, is 55% complete. The initial one million-tonne capacity is targeted for commissioning in 1H27.

According to the research house, the refinery’s capacity is expected to double to two million tonnes in 2028, bringing Press Metal closer to full alumina self-sufficiency and potentially supporting its smelting margins.

To account for higher alumina and carbon anode cost assumptions, HLIB Research cut the firm’s FY26, FY27 and FY28 earnings forecasts by 5%, 2.6% and 2.6%, respectively. “Post-adjustments, we keep our ‘hold’ rating, but with a slightly lower target price of RM8.22 (from RM8.34) based on five-year mean price-to-earnings of 25 times pegged to rolled over FY27 earnings per share.”

Meanwhile Kenanga Research maintained a “market perform” rating, noting that the stock’s current valuations largely reflected the favourable earnings outlook.

The research firm said earnings should benefit from the additional approximate 180,000 tonnes of value-added products (VAP) capacity targeted for commissioning in 4Q26, potentially lifting the VAP mix to around 75% of production and supporting a richer product mix.

“Beyond this, PT KAN represents the next key margin catalyst, with its first one million tonnes targeted for commissioning in 1H27. As the refinery ramps up, reliance on percentage-linked alumina contracts is expected to fall to approximately 20% in 2027, improving cost visibility and potentially widening smelting margins.”

One analyst noted that the group’s underlying earnings before interest, taxes, depreciation and amortisation margin had improved to 26.7% in 2Q26, from 25.9% in the preceding quarter and about 18.5% a year earlier, despite higher input and freight costs.

The analyst said the latest dividend payout was broadly in line with expectations.

It declared a second interim dividend of 2.5 sen per share, taking the total dividend for 1H26 to five sen, which was 25% higher than the four sen paid in 1H25.