Citi gives its verdict on the Pilbara Minerals share price

The Pilbara Minerals Ltd (ASX: PLS) share price has been a strong performer this week.

Week to date, the lithium giant’s shares are up almost 13% to $4.00.

This means the Pilbara Minerals share price is now up 24.5% over the last 12 months.

Why is the Pilbara Minerals share price charging higher?

There have been a couple of catalysts for the strong rise by the Pilbara Minerals share price this week.

The first has been news that Liontown Resources Ltd (ASX: LTR) has received and rejected a takeover proposal from industry giant Albemarle. This gave the whole industry a lift and sent almost all ASX lithium shares higher.

In addition, Pilbara Minerals announced on Wednesday that its board has approved its production expansion plans. This will ultimately see the company’s spodumene production capacity increase to 1 million dry metric tonnes per annum in the coming years.

Should you invest?

The team at Citi has been looking at the production expansion news and appears pleased with the plans.

And while the broker highlights that its expansion plan is more costly than expected, it feels that it “highlights Pilgangoora’s top tier status.”

In response, Citi has lifted its longer term earnings estimates but has trimmed its near term valuation to reflect the higher costs. It explained:

As expected, PLS has given the P1000 project the green light for 1000ktpa of SC5.7. The FID provided clarity on the LOM outlook including implied head grades, recovery and operating costs. Capex of $560m is ~A$200m higher than consensus, but not surprising given the inflationary environment.

After accounting for capitalised stripping FY25+ opex is expected to come down compared to FY23 guidance; FY25-29 opex of US$430-470/t may prove to be conservative. Our EBITDA lifts +20% from FY25 on implied front-loaded higher grades from the pit. Higher capex trims ~10cps from our NAV, and opex another ~10cps.

This ultimately has led to Citi retaining its buy rating with a trimmed price target of $4.60. This implies potential upside of 15% for investors over the next 12 months.

The post Citi gives its verdict on the Pilbara Minerals share price appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Best ASX lithium share to buy: Liontown Resources vs. Pilbara Minerals
• 5 things to watch on the ASX 200 on Thursday
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why ALS, Centaurus Metals, Pilbara Minerals, and Westgold shares are rising today
• Is the lithium price now on the way back up?

Motley Fool contributor James Mickleboro 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 https://ift.tt/0dt38cK