We cut earningsestimates for our lithium coverage following Citi’s Lithium Book note here. Citi expects prices to track sideways for the next 12-18 months but remains bullish on the long-term outlook; a surplus over the next few years driven by volatile pricing creates a setup for deficits later this decade. We thus lift our long-term pricingassumptions which drives NAV upgrades: hydroxide US$23k/t, carbonate US$20k/t and hydroxide US$1600/t (real). We trim our TPs across the pure plays and upgrade PLS and IGO to Buy. We may be too early on our Buy call with consensus downgrades still tocome for SepQ onwards and battery restocking unlikely until post CNY but the names have pulled back ~30% over the past three months and on balance there’s value here with producers on 0.7x P/NAV. Our sector pick is PLS for the cleanest leverage to pricingand AKE on the growth outlook.
Goes on to say:
Long term pricing revised up — We’ve lifted ourspodumene price to US$1600/t (+$400/t), carbonate to $20k/t (+$5k/t) andhydroxide to $23k/t (+$5.5k/t). To incentivise production and deliver an aboveaverage return of ~25% we think US$20k/t-23 is needed to incentives 20%pasupply growth. For more see slide 24.
