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.