Pilbara Minerals Ltd (ASX: PLS) shares have rebounded more than 15% since their recent lows on 10 September.
But at the current $2.69, shares in the S&P/ASX 200 Index (ASX: XJO) lithium stock remain down a painful 33% since this time last year.
Like all lithium miners and producers, Pilbara shares have come under selling pressure amid a medium-term oversupply of the battery critical metal.
But the year (and years) ahead could be looking a lot brighter for the ASX 200 miner, according to Monash Investors.
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Three reasons Pilbara Minerals shares look appealing
Monash Investors Small Companies Fund holds Pilbara Minerals shares.
"We believe that the lithium price is forming a bottom," the fund managers said in their September update, released on 10 October.
They explained:
The evidence for this is the curtailment of product at several operating mines and the suspension from development of others. This all points to the current lithium price being unsustainable at current levels.
With electric vehicles set to drive strong demand growth in the years ahead, we believe the price of lithium will most likely rise considerably from here in order to stimulate the required supply-side response to meet that demand.
With this backdrop, Pilbara Minerals is well-positioned to benefit.
Which marks the first reason the ASX 200 lithium producer is looking appealing.
The second reason to consider buying Pilbara Minerals shares is the miner's strong balance sheet and high-quality Pilgangoora mine, located in Western Australia.
According to Monash Investors:
The company's principal asset – its Pilgangoora mine – is a Tier 1 asset with low operating costs and expanding volumes, which will further drive down production costs.
Pilbara benefits from a robust net-cash balance sheet which allows it to ride out the unsustainably low lithium price while also capitalising on others' inability to do so, recently buying an interesting development project in Brazil.
And the third reason that Pilbara Minerals shares stand out from the pack is its management team.
"We rate the Pilbara management team highly, and believe the shares remain very attractively priced for this highly prospective miner." Monash Investors said.
What's been happening with the ASX 200 lithium stock?
Pilbara Minerals reported its FY 2024 results on 26 August.
The miner managed to increase its sales volumes by 16% from FY 2023 but was hit with a 74% fall in its realised prices.
That led to a 69% year on year drop in revenue, which came in at $1.25 billion. Underlying profit after tax was down 86% to $318 million.
Looking at the year ahead, CEO Dale Henderson said:
The focus will remain on building on our strengths; extending our low cost position as a scale operator; disciplined capital deployment to scale the operation in lockstep with lithium market growth and preserving our strong balance sheet.
Pilbara Minerals shares closed up 1.3% on the day.
