EMILI Lithium And EV Demand Will Shape Future Markets

Key Takeaways

• Strategic focus on high-value, innovative materials and sustainability is fueling margin expansion and positioning for growth in EV and eco-friendly markets.
  
• Operational efficiencies, divestment of low-margin assets, and favorable trade policies are strengthening competitive standing and supporting robust profit and cash flow resilience.
  
• Delays, market stagnation, competitive pressure, legal risks, and high capital intensity threaten Imerys' revenue growth, profitability, financial flexibility, and long-term earnings stability.

Catalysts

Engages in the supply of specialty minerals for various industries across Europe, the Middle East, Africa, Asia Pacific, and America.

• Imerys is well-positioned to benefit from the rapid expansion of electric vehicles (EVs) and battery storage, as demonstrated by robust growth in its Graphite & Carbon business and the strategic EMILI lithium project, which should drive revenue and margin improvement as lithium demand and prices recover toward the end of the decade.
  
• Increasing demand for sustainable, eco-friendly materials and stricter environmental regulations are supporting Imerys' innovation and premium product offerings (e.g., minerals for lightweighting of polymers and filtration), enabling improved pricing discipline and potential net margin expansion as sustainability becomes a larger market driver.
  
• Recent European antidumping measures and protectionist actions against Chinese mineral imports are expected to improve Imerys' competitive position and capture additional European market share, bolstering revenue growth and supporting volume recovery in the second half and beyond.
  
• Divestment of low-margin businesses (such as paper assets) and a continued focus on operational efficiencies-including cost savings and advanced materials innovation-are underpinning resilience in margins and free cash flow, providing a solid base for future profit growth.
  
• Imerys' ongoing R&D investments, success in launching new products, and expansion into high-value applications (such as conductive additives for EV batteries and green construction materials) suggest increasing revenue from high-margin, innovative segments, positively impacting earnings as secular trends accelerate.

Imerys Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Imerys's revenue will grow by 3.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from -4.8% today to 10.6% in 3 years time.
• Analysts expect earnings to reach €405.1 million (and earnings per share of €2.98) by about August 2028, up from €-166.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.6x on those 2028 earnings, up from -11.1x today. This future PE is lower than the current PE for the GB Basic Materials industry at 9.4x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.84%, as per the Simply Wall St company report.

Imerys Future Earnings Per Share Growth

Risks

• The EMILI lithium project's commercial production is delayed until at least 2030, and with current lithium prices at ~$10/kg (down 85% from project planning) and CapEx up 80% to €1.8 billion due to inflation and ESG compliance, the project is not viable at present price levels, requiring lithium prices to rise by 30–40% just to break even-posing long-term risks to revenue growth, ROI, and balance sheet leverage.
  
• Imerys faces structural stagnation or decline in mature end-markets like European construction and automotive, where activity is at historic lows, with only tentative hopes for recovery tied to interest rates and tariff stability, which may result in continued flat or declining revenues and pressure on EBITDA margins if secular decline persists.
  
• Intensifying competition from low-cost Chinese producers, particularly in high energy minerals and refractories, has forced Imerys to rely on EU antidumping measures for relief; if such protectionism fades or competitors move up the value chain, ongoing margin compression and erosion of market share could threaten long-term profitability.
  
• Legal and litigation risks, including pending and unresolved US litigation (such as talc or environmental cases), create the potential for significant one-off charges or multi-year financial overhangs, which could drag on net income and constrain the company's ability to reinvest or return capital to shareholders.
  
• The highly capital-intensive nature of Imerys' operations-heightened by large-scale projects like EMILI, portfolio divestitures (e.g., paper assets), and working capital swings-exposes the company to volatile free cash flow and elevated leverage (currently at 2.5x EBITDA), increasing vulnerability to interest rate rises, reduced credit flexibility, and limits on funding future growth initiatives, thus jeopardizing long-term net earnings stability.

Valuation

• The analysts have a consensus price target of €28.4 for Imerys based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €38.0, and the most bearish reporting a price target of just €22.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €3.8 billion, earnings will come to €405.1 million, and it would be trading on a PE ratio of 7.6x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of €21.86, the analyst price target of €28.4 is 23.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.