Liontown (ASX:LTR) Delivers 91% Revenue Surge in Q2 After Historic Underground Milestone- Time to Buy or Take Profits?

Liontown Hits Cashflow Neutral After Going Fully Underground

Liontown (ASX: LTR) just hit a major turning point. The company delivered its December quarter results this week, and for the first time since production began, Kathleen Valley is paying its own way. Revenue jumped 91% to A$130 million, while unit operating costs fell 17% to A$910 per tonne, a combination that allowed the business to reach cashflow-neutral operations for the first time. The big news? Kathleen Valley has completed its transition to fully underground mining, making it Australia’s first large-scale, 100% dedicated underground lithium operation.

For investors who have watched Liontown struggle through weak lithium prices and a painful ramp-up period, these results signal that execution risk is fading. But with the stock trading well above most analyst price targets, the question is whether the good news is already priced in.

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Underground Transition Delivers Lower Costs and Higher Output

The shift underground is more than just a milestone on paper. It changes how Kathleen Valley operates and, importantly, what it costs to run. Underground ore is cleaner, which means better recoveries and less waste. This quarter proved that, with production rising 21% to 105,342 dry metric tonnes at 5.1% lithia content.

The cost improvements are just as significant. Unit operating costs dropped to A$910 per tonne, down from A$1,093 in the previous quarter. All-in sustaining costs also improved 22% to A$1,059 per tonne. Management is targeting 70% lithia recovery by the third quarter of FY26, which would push costs even lower and bring the operation closer to its long-term targets.

With A$390 million in cash and a clear path to steady-state production of 2.8 million tonnes per annum by the end of FY27, Liontown has the runway to execute without needing to raise more capital. The company also secured a new binding offtake agreement with Canmax for 150,000 wet metric tonnes per year in 2027 and 2028, adding to its existing customer base that includes Tesla, Ford, and LG.

The Valuation Debate: Strong Quarter, But Premium Pricing

Here is where it gets tricky. Liontown shares closed at A$2.05 on Thursday, down 4.2% after recovering from an intraday low of A$1.97. The average analyst price target now sits at A$1.53, still representing a significant discount to the current market price. Of the 10 analysts covering the stock, the consensus is a Hold, with only three rating it a Buy and five maintaining Sell recommendations.

The disconnect comes down to timing. Analysts set their targets based on current lithium prices and near-term earnings, which remain negative. Liontown made an underlying loss of A$140 million in FY25, and while the December quarter shows clear improvement, the company is not yet profitable on a statutory basis.

That said, bulls point to the inaugural spot auction that cleared at US$1,254 per tonne, a solid premium to current market prices. If lithium demand continues to recover, driven by improving EV sales and growing battery storage, Liontown’s production ramp could coincide with a price recovery that makes today’s valuation look reasonable.

The Investor’s Takeaway for Liontown

Liontown has delivered exactly what it promised: a successful underground transition, falling costs, and cashflow-neutral operations. For long-term believers in the lithium story, this removes a major execution risk.

However, the stock’s premium to analyst targets suggests a limited margin for error. Current holders may consider taking partial profits after a strong run, while new investors might find better entry points on any pullback towards the A$1.50 to A$1.70 range. The operational progress is real, but at recent levels, much of that good news appears already reflected in the share price.