Allkem has lofty goal of becoming major lithium chemicals supplier

Allkem’s value has ballooned by $2.4bn in less than a month and brokers have welcomed the company’s lofty goal of snaring a 10 per cent stake of the global lithium chemicals market.

Allkem CEO Martin Perez de Solay

Allkem has the lofty goal of becoming the world’s third biggest supplier of lithium chemicals and snaring 10 per cent of the market by 2030.

The Brisbane-based company updated the market on its ambitious growth agenda last week, powered by lithium’s role as a vital ingredient in batteries used across the surging electric vehicle market.

A raft of brokers welcomed the company’s improved outlook, with most boosting their price target for the stock and maintaining their “buy’’ or “add’’ recommendation.

Allkem shares gained ground after the update, briefly hitting a record high of $14.20 last week. The stock closed down 3c at $13.06 on Monday. The stock has gained almost $2.3bn since March 16, valuing the company at $8.4bn.

Allkem CEO Martin Perez de Solay.

Allkem, which was formed in August last year when Orocobre and Galaxy Resources merged, now has a stake in assets in Western Australia, as well as Japan, Canada and Argentina.

Last month the company, headed by CEO Martin Perez de Solay, reported a $US13m ($17.5m) net profit for the December half, a bounce back from the $US29m loss it suffered in the same period a year earlier.

Now controlling assets valued at $US2.75bn, Allkem revealed ambitious growth plans for its Salar de Olaroz lithium brine project and Sale de Vida Brine development, both in Argentina.

It expects to boost production at Sal de Vida and signalled an eventual expansion of Olaroz.

“With the pipeline well-funded, we maintain our Buy recommendation on Allkem and raise our target price to $18.50 from $17.50,’’ Ord Minnett said in a client note.

“Allkem holds a suite of both operating and development lithium projects and is well placed to capitalise on the growing electrification thematic.

“With the backdrop of continuing lithium demand and pricing strength and Allkem’s substantial growth pipeline, we remain ‘buy’.”

UBS analyst Lachlan Shaw also welcomed the fact that the growth path is fully funded and noted that Allkem has debt or project finance options to boost future returns.

Morgan’s analyst Max Vickerson, pointing to increased production and capital expenditure, lifted the share’s valuation 9 per cent to $16.65 and said it had another 24 per cent of potential upside.

“We maintain our ‘add’ rating given the strong growth outlook for the company and the potential 24 per cent upside to our valuation,’’ he said.

“Allkem’s diverse products and geographical mix adds opportunities to capture value as the market evolves.’’

Originally published as Allkem has lofty goal of becoming major lithium chemicals supplier