The lithium industry has been sold off recently in response to falling lithium prices.

But it isn't all doom and gloom.

Even after factoring in weaker than expected prices, Bell Potter believes the two ASX lithium shares in this article could be seriously undervalued and positioned to deliver big returns.

Here's what the broker is recommending:

Liontown Ltd (ASX: LTR)

Speaking about its lithium price expectations, Bell Potter said:

We have marked-to-market our lithium price estimates for the recent quarter and downgraded our near-term outlook, in line with recent price weakness. Spodumene Concentrate 6% Li2O CFR China (Fastmarkets) averaged US$2,107/t in the September 2026 quarter (BP est. US$2,500/t); spot prices are US$1,562/t. We now factor in SC6 prices of US$1,777/t in FY27 (-21% on prior estimate of US$2,250/t) and US$1,750/t in FY28 (-7% on prior estimate of US$1,875/t).

While this has led to significant reductions in the broker's earnings estimates, Liontown remains its preferred ASX lithium share to buy now. 

As a result, it has reaffirmed its buy rating with a trimmed price target of $1.60 (from $1.70). Based on its current share price of 71.5 cents, this implies potential upside of approximately 120% over the next 12 months.

Commenting on its buy recommendation, the broker said:

LTR is our preferred lithium exposure. We expect a value re-rate as the Kathleen Valley ramp-up and expansion are progressively derisked over the forecast period. On recent share price weakness, LTR is trading on an EV last seen in mid-2025 when SC6 prices were around US$650/t and the company's balance sheet was materially weaker. Spot prices are now over 2.5x this level and LTR is in a net cash position.

Mineral Resources Ltd (ASX: MIN)

Another ASX lithium share that could offer major upside is Mineral Resources.

Once again, Bell Potter has made meaningful reductions in its earnings estimates to reflect weaker lithium prices, which has had a knock-on effect to its valuation.

Nevertheless, the broker feels that Mineral Resources shares are very good value at current levels.

According to the note, it has retained its buy rating with a trimmed price target of $63.00 (from $75.00). Based on its current share price of $45.81, this implies potential upside of approximately 38% for investors over the next 12 months. It also expects a modest 1% dividend yield in FY 2027.

Commenting on Mineral Resources, Bell Potter said:

Completion of the US$765m MIN-POSCO lithium transaction is expected in the current half, and will accelerate balance sheet deleveraging paired with strong cash flows from iron ore and lithium operations. MIN's mining services platform delivers a stable earnings stream that is expected to expand with internal and third-party volume growth. The company is strongly positioned to execute its next phase of growth, having reinstated dividends.