The lithium industry has been a difficult place to invest over the last 12 months.
Due to significant weakness in the price of the battery material ingredient, a great number of ASX lithium shares have crashed deep into the red.
While this is obviously very disappointing, every cloud has its silver lining. The silver lining here is that investors can now pick up some ASX lithium shares at levels that could offer very big returns in the future.
For example, two beaten down ASX lithium shares that analysts are very bullish on are listed below. Here's why they could be buys:
Mineral Resources Ltd (ASX: MIN)
Bell Potter thinks that Mineral Resources is an ASX lithium share to buy this month.
It has named the mining and mining services company on its preferred list in March with a buy rating and $79.00 price target. This suggests potential upside of 14% from current levels.
The broker is a fan of its business model, earnings diversification, and lithium expansion opportunities. It commented:
In contrast to its peers, MIN completes everything from engineering, to construction, to all aspects of operations in-house. Our Buy view is underpinned by MIN's earnings diversification, strong insider ownership, clearly articulated strategies, expertise in contracting and internal growth options at Onslow as well as potential lithium expansions including into downstream.
All up, MIN offers diversified exposure to steady income streams from the contracting business and market-driven commodity exposure coupled with earnings derived from both lithium and iron ore.
Pilbara Minerals Ltd (ASX: PLS)
Analysts at Morgans are feeling very upbeat about this lithium giant. So much so that they put the ASX lithium share on their best ideas list this month.
Morgans currently has an add rating and $4.50 price target on its shares, which implies a potential upside of 14% for investors.
It believes the company's strategy of growing its production through the cycle is the right thing to do. It commented:
We view PLS as a fundamentally strong and globally significant hard-rock lithium miner. The company has successfully executed on ramping up the expansion of Pilgangoora, while progressing plans to expand output (P680 and P1000).
Supported by a strong balance sheet, with net cash at ~A$2.1bn at the end of December, PLS' expansion plans remain uniquely undeterred by the significant weakness in lithium prices.
For PLS, the best form of defence against lithium prices is to stay on the attack, with its medium-term plans to continue expanding its production aimed primarily at building greater economies of scale and a more defensive margin.
