The Pilbara Minerals Ltd (ASX: PLS) share price has seen significant volatility in the last couple of years. Just look at the chart below — in the last month alone, it has sunk around 20%.
Can profit generated in future years translate into a recovery for the lithium miner?
ASX mining shares are heavily exposed to commodity price movement regarding profit-making and investor confidence.
Mining costs typically don't change much from month to month or even year to year. Therefore, changes on the revenue side can significantly increase or reduce profitability.
The lithium price has sunk over the past 18 months. In the quarterly update for the three months to 31 March 2024, the ASX lithium share revealed the realised price for its commodity had sunk 28% since the quarter ending 31 December 2023.
With the lithium price sinking and staying low, what has this done to the profit estimates for the next few years? Let's examine what one broker thinks.
FY24 projection
The 2024 financial year is nearly over, with only a couple of weeks left in June. However, until the reporting season arrives in August, we won't see the company's reported financials for several more weeks.
Broker UBS thinks Pilbara Minerals will generate $353 million of net profit after tax (NPAT) in FY24, which could represent a $2 billion reduction year over year.
UBS has forecast the company's net cash balance could drop to $936 million as it invests in its P680 and P1000 projects.
UBS thinks the lithium price has stabilised at levels largely consistent with Pilbara Minerals' BMX auction result of US$1,106 per tonne.
At the current Pilbara Minerals share price, it's valued at 27x FY24's estimated earnings.
How about FY25?
According to UBS, the weak conditions are expected to continue into the 2025 financial year.
The broker expects the ASX lithium share to generate $366 million of net profit in FY25, $13 million more than in FY24.
UBS expects Pilbara Minerals to allocate another A$680 million in capital expenditures in FY25 to grow P1000.
The broker forecasts the ASX share's cash balance will be A$1.25 billion at the end of FY25, with a net cash balance of A$708 million.
Expectations for FY26
The 2026 financial year could see the ASX lithium share's revenue increase by around A$300 million, which could also help the earnings before interest and tax (EBIT) increase by approximately A$300 million to $826 million.
Pilbara Minerals is projected to generate a net profit of $543 million in FY26, which would represent a 48% year-over-year increase or $177 million in dollar terms.
The increased profit and winding down of P1000 capital spending could see the net cash balance jump to $1.2 billion.
UBS has also pencilled in a dividend payment of 5 cents per share with earnings per share (EPS) generation of 18 cents.
Finally, here's the FY27 forecast
According to this series of forecasts, the 2027 financial year could be the best year.
Its revenue is forecast to increase again to almost $2 billion, which could unlock $1 billion of EBIT.
UBS has predicted that Pilbara Minerals could make a net profit after tax of $690 million in FY27, which would represent an increase of 27% year over year. If that happens, the broker predicts the company could declare an annual dividend per share of 9 cents.
