Pilbara Minerals Ltd (ASX: PLS) shares had a mixed session on Wednesday after the lithium miner released its quarterly update.
The company's shares were up as much as 5% before ultimately ending the session flat.
In light of this, the Pilbara Minerals share price remains down 40% since this time last year.
Does this make its shares good value now? Let's see what one leading broker is saying about the miner.
Are Pilbara Minerals shares good value?
Goldman Sachs has been running the rule over Pilbara Minerals' quarterly update.
It appears impressed with the company's operational performance, noting that production and shipments were comfortably ahead of expectations. However, this was somewhat overshadowed by weaker than expected pricing. It explains:
PLS reported record spodumene production of 226kt, above GSe/consensus on continuous operations of the P680 rejection facility, higher mine grade (1.5%), and plant optimisation/recovery improvements, supporting FY24 production further above guidance than GSe. While shipments were also above expectations, this was largely offset by realised pricing of US$840/t (US$960/t SC6.0 CIF China) ~10% below expectations (though this may improve following contract price reviews).
Another item that disappointed was management's cost guidance for FY 2025. It said:
On FY25 guidance, production was in line (800-840kt @ 5.2%), though unit costs were well above GSe/consensus at A$650-700/t (@5.2%; FOB; pre-royalties), including some one-off expansion costs (improving in FY26). However, including stripping and sustaining capex we estimate guidance implies a cash cost of ~US$690/t (@6%), and an AISC of ~US$800/t (including royalties/shipping; @ 6%), leaving limited cash margins of <US$100/t (pre-tax) in FY25 before growth spend.
Time to sell
Goldman has responded to the update by reiterating its sell rating and cutting its price target to $2.40 (from $2.60).
So, with Pilbara Minerals shares currently trading at $2.89, this implies potential downside of 17% over the next 12 months.
Overall, the broker feels that its shares are expensive despite the weakness over the past 12 months. It concludes:
We see near-term FCF continuing to decline on lithium prices and increasing growth spend (c. -5% FCF yield in FY25E, and <0% in FY26/27E). We see PLS trading at ~1.05x NAV (peer average ~0.9x), or pricing ~US$1,175/t spodumene (including a nominal value of A$1bn for growth) vs. peers at ~US$1,150/t (lithium pure-plays ~US$1,100/t; GSe US$1,150/t LT real), we see PLS as relatively expensive on fundamentals.
As a result, investors may want to keep their powder dry for the time being and wait for a better entry point.
