A strong move into battery grade production drove a small cost miss for Orocobre during the June quarter, but Morgan Stanley notes this was preflagged. The company achieved 66% production of battery grade production, compared to the broker's forecast of 55%.
Orocobre has flagged a proportion of sales in the coming quarter will be into contracts agreed to in December 2020 and will therefore reflect pricing of that time.
Following June quarter results Morgan Stanley forecasts for FY21 earnings per share decrease, while FY22 and FY23 earnings per share forecasts are updated to reflect increased cost assumption and battery grade production.
Orocobre is Morgan Stanley's preferred lithium stock pick. The Equal-weight rating is retained and the target price increases 20% to $6.40 from $5.35. Industry view: Attractive.
Target price is $6.40.Current Price is $7.70. Difference: ($1.30) - (brackets indicate current price is over target). If ORE meets the Morgan Stanley target it will return approximately -20% (excluding dividends, fees and charges - negative figures indicate an expected loss).
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