Lithium Stocks Fall on Concern Around Weaker Price Outlook, but We View as Buying Opportunity

Global lithium stocks fell on Oct. 12 on a broker’s note forecasting lithium prices would fall materially in 2023 as new supply enters the market. Share price for Albemarle (ALB) dropped 7.9% and Sociedad Quimica y Minera's (SQM) was down 8.4% on the same day. We see the share prices of Tianqi and Ganfeng are also under pressure. However, we believe new supplies take time to ramp-up to full capacity and strong demand from increased new energy vehicle sales will keep lithium prices high. Accordingly, we maintain our outlook for a prolonged supply deficit and keep our HKD 102 per share fair value estimate for narrow-moat Tianqi and HKD 75 (CNY 66) per share fair value estimate for narrow-moat Ganfeng.