Overvaluation Will Persist As Western Government Spurs Rare Earth Demand

Analysts have raised their price target for Lynas Rare Earths from $13.12 to $14.23. They cited improved revenue growth forecasts and a slight adjustment in discount rates.

What's in the News

• China has released new restrictions on rare-earth materials, requiring global companies selling goods with certain rare-earth components sourced from China to obtain permission from Beijing. This impacts supply chains for sectors such as semiconductors, cars, and solar panels (Wall Street Journal).
• China has announced curbs on exports of rare earths and other critical materials, demanding export licenses for products using Chinese-sourced rare earths and extending controls to lithium-ion batteries and synthetic diamonds. These measures will be effective from November 8 (Bloomberg).
• The Group of Seven (G7) and the EU are considering price floors to encourage rare earth production, as well as taxes on some Chinese exports to incentivize investment (Reuters).
• The White House is planning to expand price support for U.S. rare earth projects, including minimum price guarantees for domestic critical minerals and discussions with electronics and technology firms (Reuters).
• The U.S. administration has considered new policies regarding Myanmar's rare earth minerals in efforts to reduce reliance on Chinese supply, though no decisions have been made (Reuters).

Valuation Changes

• The consensus analyst price target has increased from A$13.12 to A$14.23.
• The discount rate has risen slightly from 7.02% to 7.17%.
• Revenue growth expectations have improved, moving from 49.31% to 50.71%.
• Net profit margin has decreased marginally from 41.03% to 40.93%.
• The future P/E ratio has increased from 19.82x to 21.05x.