Arcadium Lithium surges as RBC starts as a buy, driven by strong production growth

arcadium lithium (New York Stock Exchange: Altm) +12.7% In trading on Wednesday, RBC Capital rated the stock a new outperform with a $4 price target, saying the company offers investors “the most vertically integrated and diversified exposure to lithium and chemicals across our coverage.”

The RBC The team sees production growth as the main driver of revenues over the next few years, as lithium pricing is likely to be stable, and expects Arcadium (substitute) Lithium carbonate equivalent production will increase from 61,000 tonnes in 2023 to 142,000 tonnes in 2027, at a five-year CAGR of 23%, tripling profits over the period.

RBC says Arcadium (ALTM) provides “vertically integrated exposure to lithium; offers diversity in lithium chemistry, which should support its ability to secure revenues regardless of the dominant battery chemistry over the long term; and exposure to downstream chemicals (about 11% of revenues). “

Banking data suggests that Arcadium (ALTM) is investing heavily in growth, with the company expected to spend around $1.6 billion on approved projects over the next three years, which likely means negative free cash flow through 2027, with net debt peaking at around $860 million.