The Liontown Resources Ltd (ASX: LTR) share price could be seriously undervalued at current levels.
That's the view of analysts at Bell Potter, which believe the lithium miner's shares could generate huge returns for investors with a high tolerance for risk.
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What is the broker saying about the Liontown and its share price?
According to a note, the broker highlights that the lithium miner has announced new production guidance for the Kathleen Valley Lithium Project.
Bell Potter summarises the new guidance as follows. It said:
The mine plan sees ore throughput at Kathleen Valley reduced to 2.8Mtpa from FY27 (previously 3.0Mtpa), with recent optimisation focusing on higher margin ore and minimising underground development capital. For FY25, LTR expect to produce 260-295kt of spodumene concentrate (SC6 equivalent); 2H FY25 production is estimated at 170-185kt at unit operating costs of $775-855/t (US$505-560/t) and all-in sustaining costs (AISC) $1,170-1,290/t (US$765-$845/t).
Overall, the broker highlights that the company's plan is largely in line with its expectations and its balance sheet should see it through. Bell Potter explains:
LTR's FY25 guidance was broadly as we had modelled and we expect the lower long-term throughput rate to drop Kathleen Valley's production profile by around 5%. On our estimates and at current spot spodumene concentrate prices, LTR's balance sheet is supportive to the end of FY25; costs should then improve as production approaches steady state over FY26-27.
However, this has led to slight downgrades for its earnings estimates. It adds:
EPS changes in this report relate to adjusting for the updated guidance and longer term throughput: FY25 now -2.2cps (previously -7.1cps); FY26 +13%; and FY27 -7%.
Big return potential
In response to the above, Bell Potter has retained its speculative buy rating with a trimmed price target of $1.40 (from $1.50).
Based on the current Liontown share price of 84 cents, this implies potential upside of just under 70% for investors over the next 12 months.
To put that into context, a $2,000 investment would be worth almost $3,400 if Bell Potter is on the money with its recommendation. It concludes:
LTR's 100% owned Kathleen Valley lithium project remains highly strategic in terms of scale, long project life and location in a tier-one mining jurisdiction. LTR has offtake contracts with top-tier EV and battery OEMs. Under our modelled assumptions, we expect that LTR is fully funded to free cash flow. LTR is an asset development company; our Speculative risk rating recognises this higher level of risk.
