Pilbara Minerals Limited (ASX: PLS)

PLS is a pure-play lithium company, and it is engaged in the exploration, development and mining of lithium in Australia. The current market capitalization as of 5 January 2023 stood at AUD 11.09 billion.

Recent News: The company announced an update related to its completion of price reviews with its major offtake customers. PLS significantly improved pricing outcomes with its major offtake customers, and it will be applied for all shipments to the Company’s major offtake customers falling within December 2022 and onwards. Average pricing across major offtake customers would equate to approximately USD 6,300/DMT (CIF China) on an SC6.0 equivalent basis.

Fundamental Analysis: With 361,035 dmt (dry metric tonne) shipments during FY22, PLS reported revenue of AUD 1.2bn, an uptick of ~577% on Y-o-Y. The company reported NPAT of AUD 561.8mn for the period and closed its accounts with AUD 874.2mn cash at the bank. In June 2022, PLS Board approved the capital investment for the P680 Project, which will deliver a 100,000 tpa increase in average annual spodumene concentrate production capacity from the Pilgan Plant. The same is anticipated to increase the total annual production run rate at the combined Pilgangoora Project to ~640,000- 680,000 dmt from the December Quarter of 2023.

Technical Analysis: PLS stock prices have been in a corrective phase since Nov 2022 and approached near the significant support, indicating a possible recovery in the coming days. Prices are finding support at 200-period SMA, while a low volume activity in recent sessions supports the recovery case. Moreover, the RSI-14 period (~33.57) hovers near the oversold zone, suggesting a rebound in the stock. PLS stock prices may face resistance near AUD 4.300 & AUD 4.500 levels, whereas it might struggle to test the AUD 3.250 & AUD 3.000 support levels.

Considering the company’s current price levels trading at substantial support, momentum oscillator analysis, and growing top line and profitability status, a 'Buy' recommendation is given on this stock. The stock was analyzed at the closing price of AUD 3.720 per share on 5 January 2023, up 0.540%.

Daily Technical Chart – PLS

IGO Limited (ASX: IGO)

IGO is involved in discovering, developing and delivering the products related to clean energy in Australia. The current market capitalization as of 5 January 2023 stood at AUD 10.26 billion.

Recent News: The company released a statement mentioning drilling confirms the continuity of lithium pegmatites below the surface, where the first-ever drilling of pegmatite outcrops has returned assays up to 3.25% Li2O. It has been completed at Exploration Licence 29/962 (100% St George) and 29/638 (75% St George: 25% IGO) at Mt Alexander Project. It was also mentioned that Nova Operations also resumed in December 2022, following a fire which damaged the 10MW power station owned and operated by the company’s power partner Zenith Energy Pty Ltd.

Fundamental Analysis: The company reported an uptick of ~3% in revenue on a Q-o-Q basis in 1QFY23 to AUD 285mn. Record quarterly EBITDA of AUD 398mn was reported, mainly driven by lithium earnings, leading to a rise of ~136% in NPAT for the 1QFY23 to AUD 253mn. IGO showed a slight decline in its revenue to AUD 903mn in FY22 versus AUD 915mn, excluding revenue from greenbushes and reported NPAT of AUD 549mn, including gain on sale of the Tropicana Operation. FY23’s Production Guidance is (kt): 1,350 – 1,450, and FY23 Cost Guidance is (AUD/t): 225 –275 for its greenbushes lithium mine.

Technical Analysis: IGO stock prices are trading near the support level after a correction, and a combination of technical indicators suggests a recovery. Prices are finding support at the 200-period SMA, which coincides with a 50 percent retracement of July lows to November 2022 highs. Moreover, the RSI-14 period (~37.70) remains near the oversold zone, suggesting a rebound in the stock. IGO stock prices may face resistance near AUD 15.50 & AUD 16.30 levels, whereas it might struggle to test the AUD 12.40 & AUD 11.50 support levels. 

Considering the company’s current price levels trading at substantial support, momentum oscillator analysis, and growing top and bottom line in 1QFY23, a 'Buy' recommendation is given on this stock. The stock was analyzed at the closing price of AUD 13.440, down 0.811% per share on 5 January 2023.

Daily Technical Chart – IGO

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: Investment decision should be made depending on an individual’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report.

Note 3: Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

The Green colour line reflects the 21-period moving average. SMA helps to identify existing price trends. If the prices are trading above the 21-period, prices are currently in a bullish trend (Vice – Versa).

The Blue colour line reflects the 50-period moving average. SMA helps to identify existing price trends. If the prices are trading above the 50-period, prices are currently in a bullish trend (Vice – Versa).

The Orange/ Yellow colour line represents the Trendline.

The Purple colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period), which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status, while a reading of 30 or below suggests an oversold status.

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