The Allkem Ltd (ASX: AKE) share price has been a strong performer over the last 12 months.
As you can see below, the ASX lithium share has gained over 50% since this time last year.
Can this ASX lithium share keep rising?
According to a note out of Goldman Sachs, its analysts have been looking at the Australian lithium industry and believe Allkem is the only pure play ASX lithium share to buy right now.
A note released this morning reveals that the broker has initiated coverage on Allkem with a buy rating and $15.20 price target.
Based on the current Allkem share price, this implies potential upside of 10% for investors.
What did the broker say?
As I covered here earlier, Goldman Sachs believes that lithium prices will start to decline materially during the second half of 2023.
It expects spodumene (6% grade) prices to go from an average of US$4,330 a tonne in 2023 to just US$800 a tonne in 2024. This is expected to be driven by lithium production growing larger than demand.
In light of this, the broker believes investors should be very selective when it comes to buying ASX lithium shares. It commented:
With the pricing backdrop, we prefer low cost producers with quality resources to underpin growth optionality and vertical integration over developers.
Based on this, Goldman believes that Allkem is the only pure play ASX lithium share to buy right now. Particularly given its material production growth plans and attractive valuation. It adds:
With optionality across the Americas and Australia on the largest lithium resource in our coverage growing equity LCE production >4x by FY27E, and at a discount to peers at 1.02x NAV (peer average 1.3x), Allkem is our preferred lithium exposure. We initiate with a Buy rating and a 12-month PT of A$15.2/sh, implying 9% upside, where we see near-term Argentinian FX risk as overdone on the in-country reinvestment profile.
The broker also has a buy rating on mining and mining services company Mineral Resources Limited (ASX: MIN) with a $94.00 price target. This is largely due to its lithium exposure, which is expected to make up a large proportion of its earnings in FY 2023.
