Lynas Rare Earths shares slide as Bell Potter flags bearish outlook
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The news: Lynas Rare Earths shares extended declines from Friday after the miner reported lower-than-expected production for the December quarter.
The numbers: Lynas shares were down 2.3% to $6.87 by 2:30pm AEDT, having closed 0.9% lower in the previous session.
Bell Potter retained its 'hold' recommendation on Lynas but trimmed its target price from $7.70 to $7.20. The stockbroking firm also slashed its earnings-per-share forecasts by 21% in FY25, 26% in FY26 and 4% in FY27.
Morgan Stanley kept its 'underweight' rating and $5.70 target price, while Citi left its 'sell' rating and $5.50 target price unchanged.
The context: Bell Potter holds a "cautiously bearish" outlook for Lynas, analyst Regan Burrows said, forecasting lower for longer pricing on two of the miner's core products neodymium and praseodymium (NdPr).
Lynas suffered from production limits in Malaysia during the December quarter, Burrows noted, as well as technical issues at its newly-opened processing facility at Kalgoorlie. These issues will likely carry into the March quarter, compounded by a backdrop of weaker NdPr demand, he said.
What they said: "Whilst recent GDP outperformance in China has seen a rebound in resources stocks, we suspect the flow through to NdPr pricing will take some time and may be offset from additional production or imports," Burrows said.
"Whilst [Lynas] has strategic value, its revenue and earnings are still dependent upon a China derived price."
The sources: Bell Potter research, Citi research, Morgan Stanley research
