SQM: Future Returns Will Reflect Lithium Demand And Codelco Partnership Terms

Analysts have modestly raised their average price target on Sociedad Química y Minera de Chile, lifting fair value from about $56.66 to $61.44 as they factor in firmer lithium price expectations, improving demand forecasts, and a potential narrowing of the company’s valuation discount once the Codelco joint venture structure is clarified.

Analyst Commentary

Street research on Sociedad Química y Minera de Chile reflects a mixed but gradually improving outlook, with higher long term lithium price assumptions supporting upside potential while near term execution and policy risks keep some investors on the sidelines.

Bullish Takeaways

• Bullish analysts have raised price targets into the mid to high 70 dollar range as they update models for firmer lithium price expectations and stronger demand growth trajectories.
• Upward revisions to global lithium demand, including forecasts for volumes exceeding 1.7Mt next year and roughly 20 percent demand growth in 2025, underpin a more constructive multi year growth profile for SQM.
• The expected resolution of the Codelco joint venture structure later this year is seen as a potential catalyst for narrowing SQM's valuation discount versus peers, supporting multiple expansion if terms are viewed as balanced.
• Healthy earnings growth, even under more conservative assumptions, is viewed as achievable given SQM's scale and leverage to lithium pricing, reinforcing the case for maintaining positive recommendations despite recent volatility.

Bearish Takeaways

• Bearish analysts have trimmed ratings to more neutral stances and, in some cases, reduced price targets into the low 50 dollar range, reflecting a more cautious view on risk reward after the recent rebound.
• Higher exposure to Chilean lithium royalties is highlighted as a structural headwind that may cap the earnings uplift from stronger lithium prices and limit upside versus global peers with lighter fiscal burdens.
• Uncertainty around final Codelco joint venture terms and long term concession arrangements continues to weigh on confidence, with some investors concerned that adverse terms could pressure returns and justify a persistent discount.
• Execution risk on capacity expansion and timing of demand realization, especially if electric vehicle or energy storage growth slows, is cited as a reason to maintain more conservative assumptions on volume growth and valuation multiples.

What's in the News

• Maintained 2025 production guidance of 150,000 to 170,000 tons of 5.5% spodumene concentrate, signaling operational stability despite lithium market volatility (Key Developments)
• Raised 2025 lithium sales guidance from 20,000 tons LCE to a range of 23,000 to 24,000 tons, indicating stronger than previously expected demand and offtake visibility (Key Developments)
• Received approval from China’s State Administration for Market Regulation for the SQM Codelco public private partnership in the Atacama Salt Flat, clearing a major regulatory hurdle for the joint venture (Key Developments)
• Accepted SAMR commitments on information safeguards, corporate governance, and FRAND based lithium carbonate supply to Chinese customers, with SQM estimating that these conditions would not have materially changed its past results (Key Developments)

Valuation Changes

• Fair Value has risen modestly from approximately $56.66 to $61.44 per share, reflecting a somewhat more constructive outlook.
• Discount Rate has edged down slightly from about 8.66% to 8.63%, indicating a marginally lower perceived risk profile.
• Revenue Growth assumptions are effectively unchanged, ticking down slightly from around 15.97% to 15.94% per year.
• Net Profit Margin expectations have eased marginally from roughly 34.58% to 34.55%, signaling a stable but slightly less optimistic profitability view.
• Future P/E has increased from about 8.88x to 9.64x, implying a modestly higher valuation multiple on projected earnings.