Wesfarmers’ Fair Value Estimate Anchored by Our Long-Term Lithium Forecast

We maintain our AUD 42 fair value estimate for shares in wide-moat Wesfarmers, which screens overvalued at current prices. Wesfarmers’ share in the Mt Holland project accounts for about AUD 3 per share, or 7%, of our fair value estimate in our base case. As more lithium supplies comes online over the next decade, we expect lithium prices to gradually moderate from current levels to around USD 15,000 per metric ton—in nominal terms. Our long-term lithium price forecast is based on our projections of mine supply and demand, mostly from electric vehicles. However, if lithium prices remained at around USD 50,000 per metric ton, our fair value estimate would increase by some 30% to about AUD 54 per share—all else equal.