NIO - SQM: The Low-Cost Producer And Double-Digit Dividend Yield

2023-03-04 23:47:07 ET

Summary

• SQM's competitive advantage lies in its ability to produce lithium, iodine, and specialty fertilizers at a lower cost than its competitors due to its Chilean assets.
• SQM reported solid results for 2022, with a net income of $1.4 billion and total revenue of $3.7 billion, driven by strong demand for lithium and potassium.
• Lithium prices have dropped significantly in recent months due to oversupply in the market and weakening demand from China's electric vehicle sector.
• Despite the expiration of the lease on the Salar de Atacama in 2030, which generates all of SQM's lithium profits, the company is investing in capacity expansion and innovation to meet the expected increase in demand for lithium and other products.
• The dividend, which I deem safe, yields 10.4%, and the shares are trading 11% below the fair price of $100 per share.

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