Why This Albemarle Analyst Is Lifting Their Price Target

Albemarle Corporation ALB will benefit as electric vehicle production growth accelerates, according to a RBC Capital Markets analyst. 

The Albemarle Analyst: Arun Viswanathan maintained a Perform rating on Albemarle and raised the price target from $218 to $246. 

The Albemarle Takeaways: Charlotte, North Carolina-based Albemarle develops, manufactures and markets engineered specialty chemicals through three segments: lithium, bromine specialties and catalysts.

Viswanathan zeroed in on the company’s lithium operations and where it stands within the electric vehicle industry, and said it has a "unique" low-cost position and global scale. 

"Although, we remain optimistic on the long-term lithium growth story, given that ALB trades approximately ~28x our FY'22 EBITDA, we believe the stock is fairly valued," the analyst said. 

Albermarle CEO Kent Masters highlighted the company’s long-term growth strategy and business outlooks at the company's investor day presentation, reiterating 2021 guidance of $3.2 billion to $3.3 billion in net sales, $775 million to $815 million in EBITDA and $3.35-$3.70 in adjusted earnings per share, Viswanathan said. 

“Looking ahead to 2022 outlook, ALB estimates adj. EBITDA to be up 25-35% y/y, along with Lithium EBITDA up 40-50% on new capacity (La Negra and Kemerton start up),” the analyst said. 

“Catalysts EBITDA up 50-60% off the low base; and Bromine up 4-10%.”

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The company also offered 2026 targets of up to $6 billion to $7 billion in revenue, adjusted EBITDA in the $2 billion to $3 billion range and $2 billion in cash flow from operating, he said. 

“New capacity announcements. ALB notes that overall lithium market is expected to be tight through 2026 with global demand reaching more than 1.14M mt,” Viswanathan said. “By 2030, ALB expects global lithium demand to reach 2.5M mt, with approximately 35M EV production units and larger battery sizes (71kWh per EV, compared to 40kWh in 2020).”

ALB Price Action: Albemarle shares lost 4.99% in Monday's session, closing at $229.13. 

Photo: Gerd Altmann from Pixabay.