Shares of Press Metal Aluminium Holdings Bhd experienced a notable decline recently, dropping 9% in a single trading session, spurred by a combination of falling aluminium prices, rising carbon anode costs, and concerns over U.S. inflation and monetary policy. According to RHB Research, this market reaction presents a potential buying opportunity for investors, given the company's strong underlying fundamentals.

The decline in Press Metal’s share price is linked to aluminium prices falling below US$3,000 per tonne, while carbon anode prices have surged to multi-year highs. Additionally, increased U.S. consumer price index inflation has raised expectations of a possible U.S. Federal Reserve rate hike in October, which could strengthen the U.S. dollar and exert additional pressure on commodity prices.

RHB Research noted the potential for further near-term downside if commodity prices continue to weaken. Their analysis suggests that every US$100 change in aluminium’s average selling price could impact Press Metal’s annual earnings by 4% to 6%. Moreover, carbon anode costs, which make up approximately 16% to 19% of the company’s expenses, affect annual earnings by an estimated 2% to 3% for every 100 yuan per tonne fluctuation.

After adjusting for the rising carbon anode costs and updated foreign exchange assumptions, the research firm lowered their earnings forecasts for Press Metal by 4% for the financial year 2026 (FY26) and by 5% for FY27 and FY28. Despite these reductions, RHB Research maintained a “buy” rating, setting a revised target price of RM9.30 per share, down from RM9.80 previously. The firm cited a near-term supply deficit in aluminium and relatively elevated prices as justification for this premium valuation.

Press Metal’s share price is now approaching levels last seen three years ago, corresponding to a price range of RM6 to RM6.30 per share. At that time, aluminium prices hovered between US$2,300 and US$2,500 per tonne, while carbon anode prices were about 5,000 to 5,200 yuan per tonne. This comparison led RHB Research to describe the stock as oversold and recommended a gradual accumulation at current price levels.

Looking ahead, the commissioning of PT Kalimantan Aluminium Nusantara, 80% owned by Press Metal, is expected to begin in the second quarter of FY27. The facility is projected to reach full production capacity within two to three months after commissioning. Plans for a second phase of development are slated to start toward the end of FY27, which could bring Press Metal’s alumina self-sufficiency close to 100%. RHB Research highlighted this as a significant catalyst that would likely enhance smelting margins and improve profitability.

However, the research house also pointed to key risks that could undermine this positive outlook, including a sharp drop in aluminium prices or continued high raw material costs.