On Wednesday, BMO Capital Markets maintained its Outperform rating on shares of Sociedad Quimica y Minera (NYSE: SQM), a leading lithium producer, with a steady price target of $55.00. The firm's analysis acknowledges the complexities in SQM's position within the lithium market, influenced by factors such as the relationship between Codelco and Tianqi Lithium and the overall depressed state of the market.
The firm has adjusted its financial expectations for SQM, reducing the 2024 EBITDA estimates by approximately 18% to $1.6 billion. This revision is based on a lowered second-half 2024 average selling price (ASP) forecast for lithium to roughly $10,900 per ton, while maintaining the sales volume forecast at around 200,000 tons. The adjustment reflects a conservative outlook for the latter half of 2024, albeit with a slight anticipated increase in sales over the first half.
For the year 2025, BMO Capital has also revised its EBITDA estimates downward by about 20% to $2.75 billion. This change is due to an expectation of a more gradual recovery in lithium prices, starting from $13,000 per ton in the first quarter of 2025 to $18,000 per ton by the fourth quarter. Despite these revisions, the firm has not altered its full-year sales volume estimate of 253,000 tons for 2025.
The revised estimates take into account the current challenges in the lithium market, including the price dynamics and sales volumes. BMO Capital's reiteration of the Outperform rating indicates a positive outlook for SQM, despite the adjustments to future earnings projections and the recognition of ongoing market and partnership complexities.
In other recent news, Sociedad Quimica y Minera (SQM) reported lower-than-anticipated Adjusted EBITDA and earnings per share (EPS) for the second quarter, resulting in Deutsche Bank (ETR:DBKGn) adjusting its price target for the company to $35.00.
Despite this, the company's revenues were approximately $1.3 billion, surpassing expectations, but were offset by increased costs. Analysts from Scotiabank maintained their Sector Outperform rating on SQM, while Berenberg initiated coverage with a Hold rating due to declining lithium prices.
SQM's joint venture agreement with Codelco, "Newco," is nearing finalization, which BMO Capital Markets believes will lead to a rise in lithium prices and a decrease in uncertainties surrounding the company. SQM also launched a new venture, SQM International Lithium, aimed at advancing its lithium business outside of Chile.
SQM reported robust first-quarter earnings for 2024, with revenues nearing $1.1 billion and an adjusted EBITDA surpassing $400 million. Chile, home to SQM, has secured U.S. tax benefits for its lithium products under the U.S. Inflation Reduction Act (IRA), which is expected to boost exports and enhance the competitiveness of Chile's lithium industry in the global market. These are some of the recent developments for SQM.
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