The Allkem Ltd (ASX: AKE) share price is having a poor finish to the week.
In afternoon trade, ASX lithium share is down almost 2% to $14.29.
While this is disappointing, one leading broker sees it as a buying opportunity for investors.
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Why is Allkem an ASX lithium share to buy?
Bell Potter has been running the rule over Allkem following its latest update and continues to like what it sees.
That's despite its update coming in a little short of expectations on pricing. The broker explains:
AKE reported Q4 FY23 Mt Cattlin production of 58kt (BP est. 45kt) and Olaroz production of 5.1kt (BP est. 5.7kt). Mt Cattlin's recovery (up 49% qoq) was driven by favourable mineralisation as previously flagged. […] Product sales were materially below production across both assets. […] Realised prices were weaker than guided: Mt Cattlin concentrates at $4,297/t (guidance US$5,000/t, BP est US$4,645/t); and Olaroz third party sales at US$38,062/t (guidance US$42,000/t, BP est. US$38,500/t). Unlike previous quarterly releases, AKE did not provide quarter-ahead realised price guidance.
And while the above has led to the broker trimming its price target to $18.90 from $19.20, this still implies a potential upside of over 30% from current levels.
Bell Potter once again reiterated its buy rating on this ASX lithium share due to its production growth plans and strong demand for the batter-making ingredient. It concludes:
On a stand-alone basis AKE has a strong production and earnings growth profile into what we expect to be an exceptionally strong market for lithium. The AKE-Livent Corporation (NYSE: LTHM) merger will likely proceed; we are not confident that an interloper will emerge. A scheme booklet for the merger should be released early next quarter and include an independent expert report for a shareholder vote then completion by the end of 2023.
