It has been a tough period for PLS Group Ltd (ASX: PLS) shares.
A heavy decline on Tuesday in response to falling Chinese lithium prices means the mining giant’s shares are down almost 30% year to date.
While that is disappointing and weakening lithium prices are a concern, Bell Potter believes the selling has gone too far.
What is the broker saying?
Bell Potter notes that lithium prices have been weaker than it was expecting. As a result, it has trimmed its estimates for the medium term to reflect this. It said:
We have marked-to-market our lithium price estimates for the recent quarter and downgraded our near-term outlook, in line with recent price weakness. Spodumene Concentrate 6% Li2O CFR China (Fastmarkets) averaged US$2,107/t in the September 2026 quarter (BP est. US$2,500/t); spot prices are US$1,562/t. We now factor in SC6 prices of US$1,777/t in FY27 (-21% on prior estimate of US$2,250/t) and US$1,750/t in FY28 (-7% on prior estimate of US$1,875/t).
Our estimates of US$1,625/t in FY29 and US$1,500/t long term are unchanged. Lower lithium prices have corresponded with weaker market sentiment in China and commodity agencies pointing to a modest market surplus in 2027. China’s SC imports reached a record in August 2026 (spglobal.com) with a surge in volume from Africa; lithium carbonate imports have also rebounded. However, articles suggest that China’s downstream inventories remain lean and that underlying demand fundamentals are strong.
The good news is that despite this weakness, the broker believes PLS will continue to deliver strong profit growth. It is forecasting a net profit of $698 million in FY 2027 (up from $526 million), then an increase to $784 million in FY 2028.
PLS shares upgraded
In response to the above, Bell Potter has upgraded PLS shares to a buy rating with a reduced price target of $4.40 (from $5.20).
Based on its current share price of $3.08, this implies potential upside of approximately 43% for investors over the next 12 months.
No dividends are forecast over the near term by the broker.
Commenting on the upgrade, Bell Potter said:
We upgrade to a Buy recommendation on recent share price weakness. At current lithium market prices, PLS will generate substantial earnings and cash flow with the restart of the 200ktpa Ngungaju processing plant. P2000 and Colina development studies are being progressed, providing organic growth optionality in markets with strong underlying EV and BESS-led long term demand fundamentals.
The post Down 30%: Why a top broker just upgraded PLS shares appeared first on The Motley Fool Australia.
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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.