Natural graphite prices are currently trading at circa US$570 per tonne.
UBS sees 50% upside to current pricing and has set its long-term graphite price at $850/t.
"Our view that a) global EV sales lift five times to more than 51 million per annum by 2030, and b) a 30% larger average batter size (circa 80kWh) by 2030, coupled with our battery teardown work suggesting a potentially higher anode intensity and a greater proportion of natural graphite anode, have us constructive on the natural graphite demand outlook," the bank said.
It sees natural graphite demand rising by six times to 6.3 million tonnes by 2030, with a deficit forming from 2025.
The bank resumed coverage on Australian graphite leader Syrah Resources with a buy rating and A$1.10 per share price target.
Syrah lost its spot in the S&P/ASX 200 last month after its shares fell from over $2 at the start of the year to 60c at the start of September.
The stock has since traded as low as 43c.
"While the miner continues to negotiate a tough natural graphite backdrop with the natural graphite price, down 30% year-to-date (and we are below consensus on near-term price recovery and earnings), our optimism on the global EV outlook coupled with our deep dive into the natural graphite opportunity into the battery anode has us positive on the commodity and the stock," analysts said.
UBS said while the Balama mine in Mozambique still represented the bulk of the Syrah business, the new Vidala plant in the US was not included in the bank's model as it awaits the de-risking event of first production later this year.
Syrah jumped by more than 14% on Friday and was up by another 9.8% this morning to 56c, a two-week high.
UBS also initiated coverage on emerging European producer Talga Group and said it marginally preferred Talga over Syrah.
"Talga is seeking to produce a fully integrated resource to battery active anode material, targeting industry low carbon intensity levels and strategically located in Europe and in proximity to the continent's growing EV supply chain," analysts said.
"While we are cognisant of the risks (i.e., funding, project, and an opaque target market), our recent work on the natural graphite opportunity sees Talga well-placed to benefit."
Talga shares were unchanged at $1.195. UBS has a buy rating and $2.20 price target.