Allkem Ltd (ASX: AKE) shares have been rated a buy by an investment expert. The S&P/ASX 200 Index (ASX: XJO) lithium share is working on a number of projects to boost its earnings capability in the future.
For people that haven't heard of Allkem before, it's a lithium business that's headquartered in Buenos Aires in Argentina. It has lithium brine operations in Argentina, a hard-rock lithium operation in Australia, and a lithium hydroxide conversion facility in Japan.
Lithium has been in focus this year as the price skyrocketed, with demand outstripping supply.
With the Allkem share price up more than 60% over the past 12 months, could it still be an opportunity?
Expert view on the ASX 200 lithium share
A regular feature on Livewire is its 'buy hold sell' segment, where experts are asked about their views on different businesses.
The latest episode had Hayborough Investment Partners' Ben Rundle and Medallion Financial's Michael Wayne.
Allkem shares were one of the potential investments that were brought up on the show.
Wayne called Allkem a buy, pointing out that the lithium price has soared over the past year, going up by "300% to 400% or so".
He explained that he likes the current Allkem production, but the business also has a lot of projects that will be finished over the next couple of years.
He also noted that lithium demand is expected to grow in the years to come. Wayne believes the ASX 200 lithium share is "well-positioned to produce and capitalise on the high prices that should be forthcoming".
Rundle said the company was a hold. However, he did note the strong lithium price, and at the current price Allkem is "absolutely printing cash". He said if the lithium price stays close to where it is, then Allkem will have its "market cap in cash pretty soon".
However, he noted that the lithium price has been "demand-driven" and that there "will be a supply-side response to that at some point". He doesn't think the extra supply will "quash demand" but he doesn't have enough conviction that it won't.
In other words, Rundle is suggesting the higher the lithium price stays, the more likely it will encourage other lithium production to come online, which would then push down the lithium price.
Projects that could drive future value
Wayne referred to projects that will be completed over the next couple of years that could help the Allkem shares.
The ASX 200 lithium share gave an update about the progress of its development projects with its FY22 result.
It said that Olaroz stage two has now reached over 91% completion, and first production is still anticipated in the second half of 2022. This will deliver "material new production" from the second half of FY23 onwards.
Construction of the Naraha lithium hydroxide plant in Japan was completed during the year, with first production expected early in the fourth quarter of 2022, which means any day now. Once product qualification is complete, the plant will provide "exposure to the high-value lithium hydroxide market".
Construction at Sal de Vida commenced in January 2022. The first pond has been filled and commissioning and the first product continues to be expected by the second half of 2023.
What's next for Allkem shares?
Investors will soon hear about the production update for the three months to 30 September 2022. The quarterly numbers will be released on 21 October.
At the time of writing on Friday, Allkem shares are up 4.38% to $14.53. They have now risen around 30% this year to date.
