SQM - SQM started with Sell at Goldman as fully exposed to lithium price weakness

2023-05-19 10:25:47 ET

Sociedad Quimica y Minera de Chile ( NYSE: SQM ) -3.1% in Friday's trading after Goldman Sachs initiated coverage of the Chilean lithium producer with a Sell rating and $60 price target, believing consensus is too bullish on lithium price forecasts, potentially leading to earnings downgrades in the short to medium term.

Goldman said its cautious view is supported by a combination of expectations of a multiyear lithium oversupply and price pressure; uncertainties related to SQM's ( SQM ) concession renewal and/or new terms and costs; and limited production growth beyond 2024 especially compared to peers.

Declining prices should be partially offset by some production growth, resiliency in earnings from businesses other than lithium, and lower variable costs related to royalties and tax payments, but Goldman still sees EBITDA declining by 47% in 2024 and 51% in 2025 from 2023 estimates.

More on SQM:

• Financial and valuation comparison to sector peers
• Analysis: SQM: My Best Lithium Pick As Chile's President 'Plans' To Nationalize Lithium
• Stock price return: Down 7.5% YTD, down 21.5% in the past 12 months

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