The Pilbara Minerals Ltd (ASX: PLS) share price is down 13% in just one week. With the ASX lithium share's FY23 half-year result coming up this week, is it time to buy shares?
It has been a very fruitful time to be producing lithium over the last 12 months with how high the lithium price has gone.
Pilbara Minerals is expected to report that it made a lot of net profit after tax (NPAT) in the first six months of FY23.
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How much profit is Pilbara Minerals expected to make?
The ASX lithium share is expected to report that it made an NPAT of over $1 billion.
Commsec has reported on estimates derived from Bloomberg regarding analyst expectations.
How much profit the miner reports could influence the Pilbara Minerals share price.
The current estimate suggests that the lithium miner may have made $1.28 billion in profit.
For only six months, that's a large amount of money for a miner that only has a market capitalisation of $13.3 billion, according to the ASX.
Pilbara Minerals has essentially already indicated that it has made a boatload of cash with its quarterly updates.
For example, in the three months to December 2022, it said that its cash balance had increased by $851.1 million to $2.23 billion. The miner also revealed that it shipped 148,627 dry metric tonnes (dmt) of spodumene concentrate, while the average realised spodumene concentrate sales price increased 33% quarter over quarter to US$5,668 per dmt.
Will a dividend be declared?
Pilbara Minerals has indicated that in FY23 it would start paying a dividend.
The target dividend payout ratio has been established at 20% to 30% of free cash flow. The mid-point of that guidance would translate to the ASX lithium share paying around a quarter of its cash flow as a dividend.
Commsec's disclosure of Bloomberg's figure shows that Pilbara Minerals could pay a half-year dividend of 3.5 cents per share.
Pilbara Minerals indicated that it will start paying income tax in February 2023, so the dividend is expected to be fully franked.
At the current Pilbara Minerals share price, the projected half-year dividend could be a grossed-up dividend yield of 1.2%.
Is the Pilbara Minerals share price a buy?
Considering the company is still up more than 40% compared to 12 months ago, it certainly isn't 'cheap'.
I think it really depends on what the lithium price does over the next few years, or at least the next 12 months. But, my crystal ball isn't working at the moment.
I do like the miner's plans to be involved in more of the lithium value chain, which should unlock more earnings for the business. The recent update about using a chemical converter to benefit from lithium hydroxide sales is very intriguing as well.
For the above reasons, I think it's a long-term buy, but there could be better prices ahead.
