The Best Way To Play The Electric Vehicle Race, And Not With Tesla

Battery demand for electric vehicles, including the latest model from Tesla Motors Inc TSLA, is expected to significantly boost lithium demand. Goldman Sachs’ Robert Koort projected a threefold increase in lithium demand by 2025, mainly due to its use in batteries, which is expected to be boosted primarily by demand from electric vehicles.

While other applications, like consumer electronics, e-bikes and energy stationary storage, are expected to make incremental contributions, growth of battery electric vehicles [BEV] remains the most critical factor driving lithium demand, analyst Robert Koort commented.

“More specifically, we see the uptake of fully-electric battery electric vehicles such as the TSLA model S that do not contain fossil fuel-powered internal combustion engines as the most important factor influencing incremental demand,” Koort wrote.

Albemarle: Largest Lithium Producer

The analyst maintained a Buy rating for Albemarle Corporation ALB, with a price target of $67. The company has been included in the Goldman Sachs America’s Convention List.

Given its 49 percent stake in Talison in Australia, Albemarle is the world’s largest lithium producer. Additional capacities from Albemarle’s planned expansions in Chile should allow the company to maintain its leadership position, Koort mentioned.

Albemarle’s lithium EBITDA is expected to grow at a 25 percent CAGR from 2015-2018 largely due to the company’s tolling agreement with Chinese spodumene converters in 2016 and the La Negra, Chile expansion.

Albemarle is expected to generate volume growth of 15 percent in 2016, 20 percent in 2017 and 25 percent in 2018. Koort believes that Albemarle’s unique strength in hard rock spodumene and brine sourced lithium, along with its best-in-class resources, would enable the company to continue posting higher margins than competitors.

Posted In: Goldman SachsRobert KoortAnalyst ColorLong IdeasReiterationAnalyst RatingsTrading Ideas

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