UBS Global Research initiated coverage of Ganfeng Lithium (01772) with a "buy" rating and a target price of HK$16.8.
The research house is cautious about the outlook for lithium prices given the saturated supply along the value chain. However, it believes Ganfeng's strong volume growth, low conversion cost and control of upstream resources will reduce the pricing pressure it faces amid industry headwinds.
UBS also expects Ganfeng to benefit from a further correction in spodumene prices, unlike vertically integrated players. It believes Ganfeng will face limited pressure in selling its incremental volume given its capabilities and track record of producing high-quality lithium battery-grade compounds. UBS believes Ganfeng's earnings will bottom out in 2019-20.
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