Lower full-year guidance after 3Q results; but projects expansion progress on track
Albemarle: lower full-year guidance after 3Q results; but projects expansion progress on track
- 3Q23 net income dropped 66% y-o-y to US$302m; below expectations
- Management has slashed net sales forecast by 9-15% for the full year
- Negative to sentiment in the near term; but energy storage business expansion should support growth prospect
3Q results missed the market and cut in full-year net sales forecast. Albemarle has announced a 63% y-o-y drop in earnings per share at US$2.74, worse than market consensus (US$3.99), dragging by weaker than expected average realised selling price amid the tumbling lithium price year to date. Accordingly, although management foresees the sales volume of lithium to increase by at least 30%, it has lowered its full-year net sales forecast by 5-9% to a range of US$9.5bn to US$9.8bn after factoring in a more conservative selling price assumption. We expect this set of weak results to drag sentiment in the near term.
Solid growth prospect in Energy Storage business. As incorporated in the company’s next five-year development plan, Energy Storage business would remain a stable growth at an estimated net sales CAGR of around 25% during 2023 and 2027, which offers a faster growth potential at a higher EBITDA margin than other segments. The counter is trading at -1SD of its four-year historical mean, which should have factored in most negatives with the company’s growth prospect intact, underpinned by its strong partnership with existing industry players. Meanwhile, we lowered our TP to US$200 (previous US$260) based on a target P/B multiple of 2.2x.