We are initiating coverage on Pilbara Minerals (PLS) with a BUY rating and set a A$5.10 price target. Pilgangoora on the cusp of delivering increased output with the final phases of the P680 expansion commissioning in the next few months. We expect the lift in spodumene shipments will coincide with stronger pricing, underpinning a material lift in earnings and cash flow from FY25. PLS’s leverage to spodumene prices is strong, with a 10% lift in spodumene prices from our base case driving a ~15% higher earnings and ~10% increase in our valuation. The shift downstream is also underway, with first production from the POSCO Lithium Hydroxide JV adding a second product to the mix for the first time. Further integration downstream looks likely with Ganfeng Lithium.
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