Last Update 09 Dec 25

Fair value Increased 8.44%

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.

Expansion of lithium and specialty chemical production capacity positions the company for sustained revenue and margin growth, supported by strong demand and tight global supply.
Operational efficiency, diverse product streams, and rising barriers to entry protect the company's competitive strength and earnings resilience against market volatility.
Heavy dependence on volatile lithium markets, regulatory uncertainties, and environmental constraints threatens earnings growth, margin stability, and returns from ongoing expansion initiatives.

Catalysts

About Sociedad Química y Minera de Chile

Operates as a mining company worldwide.What are the underlying business or industry changes driving this perspective?

Strong demand growth in electric vehicles (EVs) and renewable energy storage, particularly in China and Europe, is driving a sustained recovery in lithium prices and providing visible upside to SQM's revenues and margins as sales volumes are guided to increase by at least 10% in 2025.
Expansion of lithium production capacity in Australia (Mt. Holland and Kwinana refinery reaching full capacity) and Chile, along with investments in new projects like Salar Futuro, supports long-term volume growth and higher revenue potential for SQM over the next several years.
Tight global supply and strong fundamentals in the iodine and specialty plant nutrition segments continue to support high prices and gross margins, giving SQM diversified earnings streams and margin resilience even during lithium market volatility.
Increasing barriers to entry and environmental regulations worldwide are limiting new supply in core markets like iodine and lithium, reinforcing SQM's competitive position and protecting long-term margins and cash flows.
Process optimization, operational discipline, and cost leadership, particularly through advanced brine extraction and refining methods, are helping SQM maintain a position at the lower end of the industry cost curve, preserving EBITDA margins and earnings during periods of price volatility.

Sociedad Química y Minera de Chile Earnings and Revenue Growth

Sociedad Química y Minera de Chile Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Sociedad Química y Minera de Chile's revenue will grow by 15.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 11.3% today to 28.9% in 3 years time.
Analysts expect earnings to reach $1.9 billion (and earnings per share of $7.01) by about September 2028, up from $477.5 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $724 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.0x on those 2028 earnings, down from 24.8x today. This future PE is lower than the current PE for the US Chemicals industry at 25.9x.
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 8.93%, as per the Simply Wall St company report.

Sociedad Química y Minera de Chile Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company is highly reliant on continued elevated lithium prices, but recent volatility and periods of low pricing (noted as below contract floors and ongoing "extreme volatility") create significant earnings and revenue risk, especially if long-term lithium oversupply or new battery chemistries emerge and reduce demand growth.
Ongoing negotiations and future partnership with Codelco and Chilean authorities on the Salar Futuro project introduce potential for increased state control, regulatory hurdles, and delayed project approvals (potentially to 2030), all of which threaten net margins, capital efficiency, and could limit growth visibility in core assets.
Aggressive growth in CapEx (targeting ~$1 billion annually, with most toward growth initiatives) exposes SQM to project execution risks, potential cost overruns, and the possibility of underperforming investments, which can elevate balance sheet risk and negatively impact return on invested capital and free cash flow.
Iodine segment margins are currently very high due to supply shortages, but management openly acknowledges supply additions are likely in coming years and environmental restrictions may loosen; this enhances risk of a future price correction, compressing gross profit and reducing total company earnings stability.
Expanding brine and mining operations face increasing exposure to environmental bottlenecks-such as water-use regulations and local community relations-which could increase long-term operating costs or limit capacity expansions, pressuring margins and future revenue growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $50.991 for Sociedad Química y Minera de Chile 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 $78.0, and the most bearish reporting a price target of just $37.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $6.5 billion, earnings will come to $1.9 billion, and it would be trading on a PE ratio of 10.0x, assuming you use a discount rate of 8.9%.
Given the current share price of $41.47, the analyst price target of $50.99 is 18.7% 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.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Lithium Price Shifts And Royalties Will Influence Future Share Performance