Thinking about buying Pilbara Minerals Ltd (ASX: PLS) shares following the release of its quarterly update this week?
Well, let's see what the team at Macquarie Group Ltd (ASX: MQG) is saying about the lithium giant now that it has had time to run the rule over the update.
Should you buy Pilbara Minerals shares?
Macquarie remains very positive on the lithium miner following the release of the quarterly update.
It was impressed with its better than expected performance during the fourth quarter and was pleased to see that its guidance was in line with expectations. It said:
Strong finish to FY25, FY26 guidance in-line: 4QFY25 production of 221kt was a 16% beat to VA consensus and 77% higher QoQ, reflecting higher throughput from the optimised Pilgan plant post the P1000 project. We note plant recoveries also stepped up to 71.6% (3QFY25: 67.2%) which was in line with VA. This translated to 4QFY25 sales of 216kt beating VA by 12%. FY26 production guidance of 820-870kt was in line with VA consensus of 862kt, while unit costs A$560-600/t were also in-line; the YoY improvement reflects productivity improvements and cost efficiencies post P1000 project.
One minor negative was the company's realised price. It said:
Cash costs of US$397/t FOB (A$619/ t FOB) were in line with market expectations and 8% lower QoQ. PLS realised price of US$599/dmt, missing VA consensus by 4%. Optically, the pricing was a bigger miss as the product sold in the quarter had an average grade of 5.1%. On a 6% basis, the realised price was US$703/t.
Looking ahead, the broker highlights that management has outlined cost-out initiatives to conserve cash. This includes through "its Cost Smart program and procurement benefits via bulk purchases."
Time to buy
According to the note, the broker has retained its outperform rating on Pilbara Minerals shares with an improved price target of $1.90 (from $1.50).
Based on its current share price of $1.61, this implies potential upside of 18% for investors over the next 12 months.
Commenting on its outperform recommendation, the broker concludes:
Outperform: 4QFY25 was a production/sales beat, while FY26 guidance was in-line. Our base case forecast expects PLS cash balance to bottom at A$0.5b in FY27 before improving.
Valuation: Valuation now 75/25 blend of NPV & 7.5x EV/EBITDA (prev 50/50) to reflect PLS's long-term value. TP raised from A$1.50 to A$1.90. Catalysts: Lithium market improvement, continued Pilgan plant optimisation, delivery of cost savings and CFO succession update.
