This report is an updated version of the report published on 28 February 2024 at 4:25 PM AEDT.
Pilbara Minerals Limited (ASX: PLS)
Pilbara Minerals Limited (ASX: PLS) is a pure-play lithium company based in Australia. The company is primarily engaged in the exploration, development, and mining of minerals in Australia. Its fully owned Pilgangoora hard-rock lithium operation is located nearly 120kms away from Port Hedland in Western Australia’s Pilbara region.
Recommendation Rationale – SELL at AUD 4.185
- Profit Booking: PLS’ share price has breached resistance 2 level recommended in the previous coverage on 25 January 2024; thus, it is offering a profit booking opportunity.
- Financial Decline: During H1 FY24, Revenue and Underlying Profit After Tax declined by 65% and 78%, respectively.
- Technical Indicator: The momentum oscillator 14-Day RSI (~71.28) is in the overbought zone; and thus, prices can face correction in the short term.
- Overvalue Multiples: On a forward 12- month basis, key trading multiples (EV/Sales, EV/EBITDA, Price/Earnings, Price/Book, and Price/Cash Flow) are higher than the median of the Basic Materials’ sector.
PLS Daily Chart
Daily Technical Chart; Source: REFINITIV
Valuation Methodology: Price/Earnings Approach (FY24E) (Illustrative)
The stock has crossed the resistance 2 level, hence representing a profit booking opportunity. Given its current trading levels, recent rally in the share price, and risks associated, it is prudent to book profit at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 4.185, at 03:40 PM AEDT, as of 28 February 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 28 February 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.