Top broker tips Iluka (ASX:ILU) share price to keep on rising

The Iluka Resources Limited (ASX:ILU) share price has been on fire over the last six months but could still go higher from here…

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The Iluka Resources Limited (ASX: ILU) share price has been a positive performer in 2021.

Since the start of the year, the mineral sands producer’s shares have stormed 12% higher.

This means the Iluka share price is now up almost 50% over the last six months.

Can the Iluka share price keep going?

According to a note out of Goldman Sachs this morning, its analysts believe the Iluka share price can keep rising.

The broker has put a buy rating and $8.30 price target on the company’s shares. Based on the current Iluka share price, this represents potential upside of almost 13% over the next 12 months.

And if you factor in the 2.8% dividend yield that Goldman is forecasting, this potential return stretches beyond 15%.

Why is Goldman Sachs positive on Iluka?

Goldman named three key reasons why it was positive on the Iluka share price. It explained:

(1) Compelling Mineral Sands and Rare Earth growth potential: ILU’s zircon & TiO2 sales to recover +20% in 2021 with improving global demand for ceramics and pigment. We are positive on ILU’s project pipeline and forecast c. 100% production growth in mineral sands, 15ktpa of Rare Earths by 2025/2026 and >50% increase in EBITDA.”

(2) Zircon market to enter a deficit in 2021: The 1.05Mt global zircon market will enter a deficit in 2021 on our estimates, driven by a >10% fall in global supply on mine depletion and production cuts. We expect zircon prices to rise in 2021, with ILU already flagging a US$70/t increase in price from 1 April, and we see increased likelihood of another price increase mid-year.

(3) Attractive valuation: ILU is trading at c. 0.9x NAV (A$7.96/sh), is net cash, and can fund its growth pipeline, in our view.

All in all, this could make it worth considering if you’re looking for exposure to the resources sector.

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Motley Fool contributor James Mickleboro 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 Bruce Jackson.

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