Image source: Shutterstock

Highlights

  • Pilbara Minerals’ Q3 FY25 production fell 12% short of consensus, but FY guidance remains intact.

  • Macquarie reaffirms “Outperform” rating with an AU$2.40 price target — a 71% upside.

  • Analysts optimistic on long-term growth following Latin Resources acquisition and capital management focus.

Shares of Pilbara Minerals Ltd (ASX:PLS) have been under pressure recently, disappointing investors amid ongoing lithium market weakness. However, analysts at Macquarie Group Ltd (ASX:MQG) believe this may present an opportunity for savvy buyers.

In a recent note, Macquarie reviewed Pilbara’s third-quarter FY25 update, acknowledging it was weaker than expected but ultimately maintained its bullish outlook, citing long-term strategic positioning and valuation appeal.

Underwhelming Quarter, But No Derailment

For the March quarter, Pilbara reported spodumene production of 125,000 tonnes, representing a 12% shortfall versus Visible Alpha consensus and a 34% decline quarter-on-quarter. The dip was attributed to the transition of the Ngungaju plant to care and maintenance, as well as ongoing tie-in optimisations for the P1000 expansion project.

Additionally, plant recovery came in at 67.2%, missing consensus of 69.9%. Sales volumes matched production at 125,000 tonnes but were also 12% below market expectations.

Despite these setbacks, there were silver linings. Cash costs at US$430/tonne (AU$685/tonne FOB) beat consensus by 3%, although they were 6% higher compared to the prior quarter. More positively, realised lithium prices of US$747/dmt outperformed both consensus (+4%) and Macquarie’s forecast (+7%).

The company ended the quarter with AU$1.1 billion in cash, 9% lower than the previous quarter.

Full-Year Guidance Maintained

Importantly, Pilbara Minerals reaffirmed its FY25 guidance, expecting production of 700,000 to 740,000 tonnes of spodumene concentrate at cash costs of AU$620 to AU$640 per tonne. These figures are closely aligned with market estimates and Macquarie’s forecast of 715,000 tonnes at AU$620 per tonne.

Macquarie interpreted the company’s steady guidance as a sign of resilience, even as short-term volatility affects operations.

Macquarie Stands Firm on “Outperform” Rating

Following the Q3 update, Macquarie reiterated its “Outperform” rating on Pilbara shares and maintained a 12-month price target of AU$2.40. With shares currently trading around AU$1.40, this implies a potential upside of 71%.

The broker stated:

“Q3FY25 was weaker than expected, but the company remains on track to achieve full-year guidance. We prefer Pilbara at these suppressed levels and remain optimistic about its capital management potential, especially as the company focuses on productivity improvements.”

Exploration and Growth Pipeline Intact

Macquarie also highlighted Pilbara’s recent acquisition of Latin Resources, which adds strategic depth to its growth pipeline. The company has launched an exploration program aimed at resource expansion, infill drilling, and testing new targets. Results are expected by Q4 FY26.

Meanwhile, the P2000 expansion’s final investment decision has been deferred, with Macquarie noting that no major capital commitments are expected until market conditions for spodumene improve.