This report is an updated version of the report published on 7 October 2024 at 12:06 PM AEDT

Arcadium Lithium PLC (ASX: LTM)

Arcadium Lithium PLC (ASX: LTM) is a global lithium chemicals producer with capabilities across lithium extraction processes, including hard-rock mining, conventional brine extraction and direct lithium extraction (DLE), and in lithium chemicals manufacturing for high performance applications. It has operations around the world with facilities and projects in Argentina, Australia, Canada, China, Japan, the United Kingdom, and the United States.

Recommendation Rationale – SELL at AUD 6.290

• Trading Around Resistance: LTM’s share price surpassed its R2 level recommended on 1 October 2024.
• Overvalued Multiples: On a forward 12-month basis, the stock is trading at a P/E multiple of 4.8x vs Industry (Chemicals) average of 2.0x.
• Recent Update: S&P Dow Jones Indices has announced changes to the S&P/ASX Indices, including the removal of LTM from the S&P/ASX 100 Index, effective prior to the market open on 23 September 2024.
• Rising Costs: In 2QFY24, total costs and expense totaled USD 213mn, up from USD 131.4mn reported in 2QFY23. Rising expenditure may exert downward pressure on its margins in the future.

• Emerging Risks: LTM faces risks associated with potential declines in lithium prices, increased costs from scaling up new products, geopolitical uncertainties, and other factors.

LTM Daily Chart

Valuation Methodology: P/E Relative Valuation Approach (FY June'25E) (Illustrative)

Stock might trade at a slight premium to its peers, considering the product flexibility, ongoing capacity expansion, expectations of higher sales volume for the combined business in FY25, etc. For valuation, few peers like Clover Corporation Ltd (ASX: CLV), Nufarm Ltd (ASX: NUF), and SciDev Ltd (ASX: SDV) have been considered. Considering that the stock has surpassed its R2 level, rally in share price movement, risks associated, and downside indicated by the valuation, the share price can face consolidation at the current levels.  Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 6.290, at 10:15 AM AEDT, as of 7 October 2024. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. 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: The reference date for all price data, currency, technical indicators, support, and resistance levels is 7 October 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.