Investment Rating - The report upgrades SQM to Overweight (OW) from Neutral (N) based on a positive outlook for lithium prices over the next two years [1][4]. Core Insights - The lithium industry is expected to return to a structural deficit of approximately 130kt/year over the next five years, primarily driven by a significant 17% upward revision in Energy Stationary Storage (ESS) demand, which is projected to account for 42% of global lithium consumption by 2030 [1][11]. - J.P. Morgan has raised its price forecasts for lithium carbonate and hydroxide for 2026 and 2027 by 43% and 66% to $17,500/t and $22,000/t respectively, indicating a potential price increase of 62% from the current spot price of $13,550/t [1][11]. - SQM's EBITDA for 2026 is forecasted at $3.3 billion, representing a 76% increase from previous estimates and 60% above consensus [1][11]. Summary by Sections Price Forecasts - The new price forecasts for lithium carbonate and hydroxide reflect a tighter market, with expectations of elevated prices due to the need for higher incentives to bring new supply online [1][11]. - The report anticipates SQM to trade at a multiple of 6.6x EV/EBITDA at the peak of the cycle, consistent with previous industry peaks [1][11]. Demand Drivers - ESS demand is expected to exceed previous forecasts, with a significant increase in battery shipments driven by policy support in China and strong order momentum in Europe [21][11]. - The report highlights that ESS will represent 34% of total lithium market demand in 2026, increasing to 42% by 2030 [21][11]. Supply Outlook - Despite higher supply projections from various regions, the supply-demand balance is expected to remain in a deeper deficit, with deficits projected at -138kt LCE in 2026 and -127kt LCE in 2027 [1][11]. - The report notes that SQM's growth is back on track, with expected volume increases and low costs, supported by favorable political developments in Chile [1][11]. Valuation - The December 2026 price target for SQM is raised to $79.00 from $41.00, derived from a DCF analysis and a target EV/EBITDA methodology [12][11]. - The valuation incorporates the terms of the joint venture agreement with the Chilean government, which allows SQM to retain a significant portion of free cash flow from operations [12][11].