Pilbara Minerals Broker Ratings Updated February 27 (2024)

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• February 24, 2024

Updated Pilbara Minerals Broker Ratings following its earnings reports

Citi – Following the recent rally in the share price, Citi has downgraded Pilbara Minerals to Sell from Neutral. The broker notes the shares are trading above its $3.60 target price, which remains unchanged.

Morgans – In the first half, Pilbara Minerals’ underlying earnings (EBITDA) and profit fell short of consensus forecasts by 8% and 15%, respectively, according to Morgans. The broker anticipates that the company will be among the first to benefit from a recovery in lithium prices, noting early indications of a bottoming out in prices. Beyond the financials, Morgans highlights a dearth of significant news during the presentation of the results. No dividend was declared. As a result, the target has been lowered to $4.50 from $4.60 while maintaining an Add recommendation.

Macquarie – Pilbara Minerals’ performance in the December half fell short of both consensus and Macquarie’s forecasts, primarily due to higher production costs resulting in a 9% earnings (EBITDA) miss. While capital expenditure slightly exceeded expectations, it helped reduce the miss in free cash outflow to 6%. Revenue also lagged, falling 1% shy of consensus. Macquarie notes the company’s pursuit of organic production growth while peers are scaling back production, a strategy facilitated by its complete control and strong balance sheet. The broker anticipates Pilbara Minerals could maintain a cash balance exceeding $1.3 billion over the next 18 months, although the cash outflow is expected to accelerate in the near to medium term. Earnings per share (EPS) forecasts are revised downwards by 7% for FY24 and by 1% for FY25, with a 4% decrease for FY26 due to changes in finance cost assumptions. Despite the challenges, the Outperform rating is maintained, although the target price is slightly reduced by 2% to $4.40 from $4.50 to reflect lower forecast near-term earnings.

UBS – UBS highlights increased costs (including corporate, exploration, and finance) as the primary reason behind Pilbara Minerals’ weaker-than-expected net profit of $273 million for 1H24, compared to the broker’s forecast of $345 million. Management responded by cutting capital expenditure and reducing dividends, resulting in a $200 million cost saving. However, the analyst remains cautious, noting that until lithium supplies are reduced, the market will likely remain oversupplied, potentially impacting prices. Despite trading at a premium, Pilbara Minerals is regarded as a solid company. UBS maintains production forecasts of 675kt in FY24 to 1050kt in FY26. The Sell rating is retained, with the target price decreasing to $2.50 from $2.65.

Morgan Stanley – Pilbara Minerals’ first-half operating earnings (EBITDA) fell below Morgan Stanley’s estimates, with a corresponding miss at the profit line. The company did not declare an interim dividend. While capital expenditure aligned with expectations, overall free cash flow exceeded forecasts. Given these factors, Morgan Stanley maintains an Underweight rating, with a target of $3.00.

Bell Potter – Pilbara Minerals’ first-half underlying earnings fell below expectations, primarily due to higher-than-anticipated corporate and exploration costs, according to Bell Potter. The broker notes that spot lithium index prices indicate a substantially weaker second half but anticipate improved pricing and market sentiment in FY25 driven by supply chain restocking. Bell Potter views the stock as a direct exposure to global lithium fundamentals and highlights its position as a low-cost producer, enabling it to weather weaker lithium prices and support expansion initiatives. The broker maintains a Hold recommendation, with reduced targets of $3.55 from $3.60.