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On Wednesday, Citi analysts, led by Carolina Cruzat, adjusted the price target for Sociedad Quimica y Minera (NYSE: SQM), a leading global lithium producer, to $54.00, down from the previous target of $60.00. Despite the reduction, the firm maintained a Buy rating on the stock, suggesting continued confidence in the company’s prospects. Currently trading at $39.65, between its 52-week range of $32.24 to $51.90, InvestingPro analysis suggests the stock is undervalued, with additional insights available in the comprehensive Pro Research Report.
The revision in the price target reflects a 10% decrease, primarily due to anticipated lower short-term lithium prices. However, Citi analysts underscored several factors supporting their positive outlook. They expect robust global lithium demand growth, which is projected to increase by 21% in 2025, surpassing supply growth. Additionally, they anticipate higher lithium sales volume for SQM and note that the company’s valuation is at a 37% discount on its enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) compared to its peers. With a market capitalization of $11.36 billion and an overall Financial Health Score of "GOOD" according to InvestingPro, the company has maintained dividend payments for an impressive 31 consecutive years.
Citi’s analysis projects that SQM’s EBITDA for the year 2024 will experience a significant year-over-year decrease of 55%. Despite this, the analysts revised their fourth-quarter 2024 estimates for lithium volume sales upward, believing that SQM will achieve its highest historical sales volume to date at 53,000 tons. Looking ahead to 2025, Citi forecasts a 24% year-over-year increase in EBITDA for SQM. The firm also increased its lithium sales volume forecast for 2025 by 14% compared to previous estimates, which could help mitigate the impact of lower average selling prices, predicted to be around $10,000 per ton throughout the year.
The analysts noted that at the end of 2024, SQM’s net financial debt (NFD) to EBITDA ratio stood at 1.6 times, slightly above the 1.3 times threshold that company management considers prudent. Despite this, the Buy rating indicates that Citi views the company’s financial position and market prospects favorably. InvestingPro data shows the company operates with a moderate debt-to-equity ratio of 0.96, while maintaining strong liquidity with a current ratio of 2.94. Subscribers to InvestingPro can access over 30 additional financial metrics and exclusive insights about SQM’s future prospects.
In other recent news, Sociedad Quimica y Minera (SQM) has been the focus of an updated analyst report from Citi. The firm has adjusted its price target for SQM to $60, down from $64, while maintaining a Buy rating. This adjustment reflects anticipated continued pressure on lithium prices through 2025, influencing the 6% reduction in the target price. Despite this, Citi remains optimistic about the robust growth in lithium demand, predicting a 30% year-over-year increase in battery demand by 2025.
Additionally, SQM’s lithium division is experiencing significant growth in volume sales, which supports the company’s production capabilities. However, Citi projects a 55% year-over-year decrease in SQM’s EBITDA for 2024 due to expected average lithium prices of $11,000 per ton. Looking ahead to 2025, the firm forecasts a 22% increase in EBITDA year-over-year, driven by higher lithium sales volumes and a moderate price improvement. Citi also notes that SQM’s stock is undervalued, trading at a 43% discount compared to its global peers on a projected 2025 EV/EBITDA basis.
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