BELL POTTER RESEARCH
Investment view – Hold, Target Price $3.55/sh (unchanged)
PLS is a large, liquid and clean exposure to global lithium fundamentals and sentiment. PLS is a low-cost producer, it operates in a tier one jurisdiction in Western Australia, and has a strong balance sheet ($1.7b net cash at 31 December 2023) which can withstand weaker lithium prices and support expansion programs. We are confident that EV-led demand will see strong long-term lithium market fundamentals. We see the potential for PLS to participate in industry consolidation. We retain our hold recommendation on valuation grounds.
It seems strange that Bell Potter has the above summary conclusion but yet their projected numbers reflect something less favourable
2024 est
NPAT $229 mil
PEx 41.3x
Spodumene Price Assumption: $1729 /ton
My points
1. It is unlikely they could achieve $1729/T this 2024, the latest quarter average was under $1k
2. Even at $1700+/T, a PE of 41.3x is very high, so its actual PE would be much higher at lower spodumene prices
3. Bell Potter does not believe Spodumene price would get any higher than $1600 over the next 3 years
PLS at current price is still trading at a premium relative to the situation the lithium industry is at.
It is therefore not surprising that it has been the target of shorters in recent times, but the faith in the lithium space remains strong which explains the disconnect between stock price and actual fundamentals.
LS — TradingView
