Ann: Revised Proposal from Albemarle, page-192

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We expect demand for lithium to triple by 2030, and Albemarle (NYSE: ALB) is one of our top lithium producer stock picks. In fact, it’s one of Morningstar analysts’ favorite 33 undervalued stocks for the third quarter. Albemarle has raised its dividend for 29 consecutive years, earning it Dividend Aristocrat status. It lands on our recent list of 10 cheap dividend-growth stocks to buy, too.Albemarle is one of the world’s largest lithium producers. Its Salar de Atacama salt brine asset in Chile is among the world’s lowest-cost sources of lithium. The Talison joint venture in Australia is one of the best spodumene resources in the world, which allows Albemarle to be one of the lowest-cost lithium hydroxide producers, as spodumene can be converted directly into hydroxide. Albemarle is also the world’s second-largest producer of bromine, a chemical used primarily in flame retardants for electronics. As electric vehicle adoption increases, we expect high-double-digit annual growth in global lithium demand. In response,Albemarle plans to expand its annual lithium production capacity from 200,000 metric tons in 2022 to 500,000-600,000 metric tons by 2030.Key Morningstar metrics for AlbemarleFair Value Estimate: $350Star Rating: 5 StarsEconomic Moat Rating: NarrowUncertainty Rating: High
Fair value estimate for Albemarle stockOur fair value estimate is $350 per share. We assume roughly a 10% weighted average cost of capital and use a multiple of 12.5 times midcycle EBITDA to value free cash flows generated beyond our 10-year explicit forecast horizon. The bulk of our forecast growth comes from lithium. We expect lithium demand to grow at nearly a 20% annual rate from around 800,000 metric tons in 2022 to over 2.5 million metric tons by 2030. We forecast Albemarle’s lithium capacity will grow to nearly 600,000 metric tons during the next decade and will benefit from strong demand growth. Albemarle’s low costs should allow it to benefit tremendously from additional volume sold. As demand more than triples by 2030, we expect the lithium market will remain in a deficit, supporting prices well above the marginal cost of production. We forecast prices will average in the mid-$30,000 range per metric ton from 2023 through 2030.