The Allkem Ltd (ASX: AKE) share price could be great value and destined to climb materially higher.
That's the view of the team at Bell Potter, which has spoken very positively about the lithium miner today.
Image source: Getty Images
Why is the Allkem share price great value?
In response to the lithium miner's half year results on Monday, Bell Potter has reiterated its buy rating and lifted its price target to $18.05.
Based on the current Allkem share price of $9.07, this implies potential upside of almost 100% over the next 12 months.
The broker highlights that Allkem's first half earnings were better than it was forecasting. It explained: "AKE reported underlying 1H FY22 EBITDA of US$98m (BP est. US$83m) and NPAT of US$57m (BP est. US$44m)."
Why is the broker so positive?
Bell Potter notes that Allkem is expecting lithium prices to improve further in the second half. This has led to the broker upgrading its earnings forecasts accordingly.
In addition, its analysts like the company due to its production growth potential, which will allow it to benefit greatly from these high lithium prices.
The broker commented: "AKE is a go-to stock for multi-project exposure to lithium markets. AKE will realise significantly higher prices from 2022, driving material operating cash flow growth. Looking ahead, AKE has a portfolio of growth projects to materially lift production over the next three years."
"Naraha will commence conversion of primary grade lithium carbonate into 10ktpa battery grade lithium hydroxide by mid-2022. At Olaroz, an additional 25ktpa LCE capacity will be commissioned from 2H 2022, lifting capacity at this asset to over 40ktpa. Construction of Sal de Vida Stage 1 at around 11ktpa LCE has commenced for first production from 2023. In aggregate, we expect AKE's equity share of production to lift from 33kt LCE in FY21 to over 50ktpa LCE by FY24," it added.
