Buy this ASX share for its ‘undervalued’ lithium business: expert

A miner in a hardhat makes a sale on his tablet in the field.A miner in a hardhat makes a sale on his tablet in the field.

ASX shares involved in lithium production have been so hot in recent years that it’s difficult to find cheap buys these days.

But Wilson Asset Management analyst Cooper Rogers reckons he’s found a major resources company where the market is materially undervaluing its lithium operations.

Mineral Resources Limited (ASX: MIN)’s a buy for us,” he said in a Wilson video.

“Their mining services division is underwritten for a 10% growth on their EBITDA line next year, along with that, we really do like the lithium business.”

Lithium, which is highly sought after for its role in modern batteries, could be a massive cash cow for the company in the coming years.

“We think [the lithium business] is undervalued versus its peers,” said Rogers.

“We think the MD Chris Ellison is going to come out of the full-year result and outline a really strong strategy for that division… that’s a catalyst for this stock to re-rate.”

The company’s preliminary results are scheduled to report on Wednesday.

The Mineral Resources share price has fluctuated widely in 2022, as mining stocks do. It is currently about 5.3% down from the start of the year.

(Almost) everyone reckons this stock is a buy right now

Rogers is not the only one bullish on Mineral Resources Limited.

According to CMC Markets, 10 out of 11 analysts recommend it as a buy. Nine of those 10 rate Mineral Resources as a strong buy.

Last week, The Motley Fool reported that Citibank analysts have a buy rating on the stock and a price target of $73.

That’s a nice 31.5% premium on the Thursday closing price of $55.50.

“Citi is positive on Mineral Resources due to its exposure to iron ore and lithium,” wrote James Mickleboro.

“Its analysts expect the price of the latter to stay higher for longer thanks to strong demand and tight supply.”

Bell Potter has a $75 price target for similar reasons to Rogers.

“Bell Potter is bullish on Mineral Resources due largely to its lithium business,” The Motley Fool reported last week.

“The broker is expecting this side of its business to start yielding increasing returns from FY 2023.”

The post Buy this ASX share for its ‘undervalued’ lithium business: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia

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