BIMB Securities Research said the broader macroeconomic and trade policy risks may weigh on sector performance.
PETALING JAYA: Increasing demand in key industries and the addition of new capacity look set to support growth of the domestic industrial sector.
However, external factors including uncertainty surrounding President-elect Donald Trump’s trade policies and geopolitical tensions could disrupt the overall sector, creating volatility in the short term.
“While there are growth opportunities, the broader macroeconomic and trade policy risks may weigh on sector performance,” BIMB Securities Research said.
The research house, which maintained its “neutral” call on the sector, has “buy” calls on Press Metal
Aluminium Holdings Bhd, OM Holdings Ltd and Wellcall Holdings Bhd.
It has “hold” calls on Scientex Bhd and Hextar Global Bhd and “sell” calls on Kumpulan Perangsang Selangor Bhd, PMB Technology Bhd and Ann Joo Resources Bhd.
BIMB Securities Research said Press Metal stood out as its selected “buy” stock.
“We have an optimistic outlook on aluminium, supported by expectations of a recovery in demand, driven by a rebound in average selling prices and increasing global awareness of sustainable and low-carbon industries,” the research house said.
It added that Press Metal would benefit from a hike in global aluminium prices, the removal of the 13% tax rebate on aluminium exports by China and rising demand for non-China aluminium. It said the company is well-positioned to capitalise on the potential spillover effects of heightened US-China trade tensions, as buyers diversify supply chains.
“While risks such as a potential supply shortage in alumina and rising prices remain, Press Metal’s joint-venture arrangements and strategic sourcing initiatives are expected to help mitigate these challenges.,” the research house said.
Looking ahead, BIMB Securities Research said Press Metal’s projected earnings before interest, taxes, depreciation and amortisation margins for 2024 and 2025 are expected to exceed the peer average.
Meanwhile, the research house said it believes lower interest rates will drive growth in metals demand and industrial manufacturing.
It pointed out that the US Federal Reserve had projected two rate cuts this year due to high inflation and this was expected to positively impact demand for metals and industrial manufacturing.
In addition, lower borrowing costs should encourage investment in key sectors like infrastructure, construction, and manufacturing, which are major users of metals such as steel, aluminium and copper.
“This will help reduce financing costs, boost demand for raw materials, and ease cost pressures on manufacturers, potentially improving margins. While the full effects may take time, the overall environment of lower rates is expected to support growth in the metals and industrial sectors in the medium term,” it added.
Similarly, BIMB Securities Research said the steel sector was poised for growth, driven by key infrastructure projects such as the the phase of Light Rail Transit 3 project and the Sabah-Sarawak Link Road along with robust demand from the real estate sector, particularly residential projects and industrial parks.
It added that projects outlined in the Public-Private Partnership Master Plan 2030 (Pikas 2030) and the National Budget 2025 were also expected to boost domestic steel consumption, particularly for long steel products like reinforcement bars and structural steel as well as flat steel for construction finishes.
“With resilient demand from these sectors, local steel producers stand to benefit from increased order volumes and potential price hikes,” the research house said.
However, it added that downside risks persist despite the rebound in domestic investment, with rising costs for raw materials such as iron ore and scrap and global supply chain disruptions posing challenges.
