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Kenanga Research upgrades building material sector to Overweight on strong Press Metal performance

Kenanga Investment Bank Berhad Research has upgraded the building materials sector to an ‘Overweight’ rating, with a focus on Press Metal Aluminium Holdings Bhd. The Malaysian-based aluminium company has shown significant global presence.

The research house highlighted improved earnings performance in the sector during the first quarter reporting season, leading to an optimistic outlook. Kenanga Research expects aluminium prices to remain stable due to supply constraints, while stable steel prices will reduce earnings volatility for steel product producers.

An ‘Overweight’ stock rating suggests that a stock should have a higher weighting in a portfolio compared to its current benchmark index. Kenanga Research recently upgraded Press Metal to ‘Overweight’ from ‘Market Perform’, with a target price of RM6.25 for the next 52 weeks. They cited the revival of water projects as a key driver for industry growth.

Aluminium prices have been rising, driven by strong consumption in China, demand from renewable energy projects, and electric vehicle production. The closure of fossil fuel-powered smelters and the anticipation of promising periods for water pipe manufacturers are expected to limit supply and drive growth in the sector.

AL Circle’s industry report highlighted the improved long-term outlook for the aluminium industry, driven by investments in renewable energy and sustainable technologies. The global aluminium market is expected to grow as nations and corporations commit to carbon neutrality. Demand and prices for aluminium are predicted to rise in the latter half of 2024, with a focus on sustainability and the transportation and renewable energy sectors driving demand.

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