PLS Group Shares Sink 8% as Lithium Giant Faces MSCI Index Removal and Citi Cuts Price Target to $4.10

SYDNEY — Shares of PLS Group Ltd., Australia's largest lithium producer, fell 8% on Thursday. A planned removal from a major MSCI index and a weak session for commodity stocks drove the decline.

PLS shares closed down 25 Australian cents, or 8.07%, at A$2.85. The stock traded between A$2.83 and A$3.12, with more than 34 million shares changing hands. PLS has a market value of about A$9.2 billion.

The decline erased much of Wednesday's 6.5% gain, which had carried the stock to a near one-month high. Analysts said that rally was driven largely by short-covering rather than new fundamental news.

MSCI removal

Index provider MSCI said PLS will be removed from the MSCI Australia Index. The change typically leads to selling by exchange-traded funds and other passive investors that track the index.

The broader market also offered little support. The S&P/ASX 200 index closed 0.35% lower, and gold and lithium stocks traded broadly lower after a weak overnight session for commodity prices.

Citi cuts target

Citi reiterated its buy rating on PLS this week but lowered its price target to A$4.10 from A$5.50. The new target still implies a potential gain of about 44% from Thursday's close.

Meanwhile, Mitsubishi UFJ Financial Group raised its voting power in PLS to 8.38% as of Nov. 6, according to a regulatory filing.

Lithium price slide

Lithium prices have swung sharply over the past year. They rose to a peak in May before falling again amid concerns about oversupply and softer demand.

Recent declines were driven by market chatter that a major Chinese battery maker trimmed its October production plans, along with worries about new supply and trade headwinds.

As a pure-play lithium producer, PLS is heavily exposed to lithium prices. Its Pilgangoora operation in Western Australia is one of the world's largest hard-rock lithium mines.

The company was formerly known as Pilbara Minerals before changing its name to PLS Group.

Shares down for the year

PLS shares are down about 17% over the past year. Other ASX lithium stocks also fell on Thursday, including Liontown, which dropped 7%.

Lithium stocks have been among the most volatile on the Australian market, often swinging sharply on changes in Chinese lithium carbonate prices and short-selling activity.

Investors will be watching lithium prices, Chinese battery demand and supply discipline among producers for signs of a sustained recovery.

This article is for informational purposes only and does not constitute investment advice.