Broker tips Allkem share price to rise 36% from current levels

Allkem shares have been tipped to charge significantly higher…

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The Allkem Ltd (ASX: AKE) share price has been having a strong week.

Since the end of last week, the lithium miner's shares have risen an impressive 11%.

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today.

Image source: Getty Images

Can the Allkem share price keep rising?

One leading broker has responded very positively to Allkem's full year results this week and is tipping its shares to keep climbing from here.

According to a note out of Bell Potter, its analysts have reiterated their buy rating with an improved price target of $18.76.

Based on the current Allkem share price of $13.75, this implies potential upside of 36% for investors over the next 12 months.

What did the broker say?

Bell Potter notes that Allkem delivered a profit after tax of US$354 million in FY 2022, which was broadly in line with its estimate. It added:

The result was a substantial turnaround on the prior year driven by a lift in sales volumes at Mt Cattlin (up 36%) and a substantial increase in realised prices.

The good news is that the broker is expecting another jump in profits next year. In fact, its analysts believe that Allkem's EBITDA will double from US$531 million to US$1,071 million. It adds:

We expect AKE's cash generation to lift substantially into 2023 with ongoing strength in lithium demand, commodity prices and production growth. AKE is aiming to maintain 10% share of supply in a global lithium market experiencing unprecedented growth; it has a portfolio of growth projects, balance sheet strength and cash flow from existing projects to achieve this. EPS changes as a result of this report are: FY23 -5%; and no material change over FY24-25.

In light of this, the broker believes that the company's shares are good value at the current level.

Motley Fool contributor James Mickleboro has positions in Allkem Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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