Pilbara Minerals Ltd (ASX: PLS) shares will be on watch next week.
That's because the lithium giant is scheduled to release its highly anticipated quarterly update on 24 July.
Ahead of the release of the update, let's take a look at what the market is expecting from the miner when it hands down its report card.
What should you expect?
According to a note out of Goldman Sachs, its analysts are expecting Pilbara Minerals to report stronger than expected spodumene production for the three months ended 30 June.
It is forecasting production of 194,000dmt, which is up 10.2% quarter on quarter and 19% on the prior corresponding period.
Whereas the consensus estimate is for a smaller increase in production to 184,000dmt for the fourth quarter.
What about sales?
Goldman is expecting Pilbara Minerals' spodumene sales to also come in ahead of expectations. It is forecasting sales of 209,000dmt, compared to the consensus estimate of 190,000dmt.
However, the broker believes this will be achieved with a realised spodumene price of US$923 per tonne. This is short of the consensus estimate of US$961 per tonne. It is also down 71.7% from US$3,256 per tonne a year earlier.
Still profitable
Despite the collapse in lithium prices, Goldman expects Pilbara Minerals' operations to remain profitable. The broker has pencilled in unit cash costs (including freight and royalties) of US$489 per tonne. This will be down from US$519 per tonne in the previous quarter.
At the end of the quarter, the broker expects this to leave Pilbara Minerals with a cash balance of US$1,299 million.
Should you buy Pilbara Minerals shares?
Despite its relatively positive view on the company's operations, Goldman Sachs isn't recommending Pilbara Minerals shares as a buy.
It currently has a sell rating and $2.60 price target on its shares. Based on its current share price of $3.00, this implies potential downside of approximately 14% for investors over the next 12 months.
It recently commented:
We see near-term FCF continuing to decline on lithium prices and increasing growth spend (c. -10% FCF yield in FY24E, and c.0% in FY25-27E). Overall, we see PLS spending ~A$0.85bn on P1400, taking total capex spend from FY24E to FY28E on current and P1400 expansions to ~A$3bn, ~A$0.9bn ahead of consensus which already prices further expansion. Furthermore, we see PLS' net cash declining to ~A$0.8-0.9bn (though still a relatively strong position vs. some peers and defensive into a declining lithium price), where with the stock trading at ~1.2x NAV (peer average ~1.05x), or pricing ~US$1,300/t spodumene (including a nominal value of A$1.1bn for growth) vs. peers at ~US$1,210/t (lithium pure-plays ~US$1,110/t; GSe US$1,150/t LT real), we see PLS as relatively expensive on fundamentals.
