The Allkem Ltd (ASX: AKE) share price has suffered a double-digit fall over the last month, with a decline of 14%. Compared to a fall of 2% for the S&P/ASX 200 Index (ASX: XJO), the ASX lithium share has heavily underperformed.
But when it comes to ASX mining shares, a heavy decline can be a good time to invest during a cyclical low. We've seen the Pilbara Minerals Ltd (ASX: PLS) share price go through various bouts of volatility as the lithium price changes and investor confidence adjusts.
The company had postponed the release of its full-year result "to allow finalisation of financial statements and the annual report". It's planning to release the result tomorrow — 22 August 2023.
Do analysts like the ASX lithium share?
It'll be interesting to see if the ASX lithium share has anything notable to tell the market which made its financials take longer to prepare.
According to Commsec, analysts are very positive on the business with 13 labelling Allkem shares a buy and five with hold ratings. Not one of the analysts covered by Commsec rates the share a sell.
Things seem to be going quite well for the business. In the quarterly update for the three months to June 2023, it said the Olaroz lithium facility produced record annual lithium carbonate of 16,703 tonnes, up 47%. It made quarterly sales revenue of around US$132 million with a gross cash margin of 85%.
Mt Cattlin achieved annual production of 130,984 tonnes of spodumene concentrate, beating the previous guidance. For the three months to June 2023, the production of 58,059 dmt was a quarter-on-quarter increase of around 50%. It sold 46,787 dry metric tonnes of spodumene, generating around US$201 million of revenue at a gross cash margin of around 80%.
The business is making progress on a number of development projects, which can unlock further cash flow for the business. It had net cash of US$648.4 million at 30 June 2023.
Allkem and Livent recently announced a definitive agreement to combine in an all-stock merger of equals to create a "leading global integrated lithium chemicals producer".
My 2 cents on the Allkem share price
This is essentially the company's lowest valuation since early May, so it could be a good time to invest as long as nothing unfortunate is happening within the business.
Lithium, as a commodity, seems to have a very positive future given the large and growing demand for electric vehicles.
Allkem's projects and tie-up could lead to greater scale and stronger operating margins (ignoring changes in the lithium price).
According to Commsec estimates, the Allkem share price is valued at less than 10 times FY24's estimated earnings, with more growth projected after that.
I'd prefer to invest at an even lower share price, but the current valuation could enable investors to benefit over the long term. However, I do prefer Pilbara Minerals shares because of its Australian-based operations and huge cash pile.
