Now could be the time to jump on Lynas Rare Earths Ltd (ASX: LYC) shares according to one leading broker.
That's because it is tipping the ASX 200 mining stock to rally significantly higher from current levels over the next 12 months.
Image source: Getty Images
What is the broker saying about this ASX 200 mining stock?
Bell Potter was pleased to see that Lynas is expanding its product range.
As covered here, the Lynas Malaysia business is targeting the first production of two separated heavy rare earths (HRE) products in 2025. A new process will produce separated dysprosium (Dy) and terbium (Tb) at Lynas Malaysia for the first time and will complement Lynas' existing light rare earths product range.
Dy and Tb are both essential to the high-performance rare earth permanent magnets used in electric vehicles and high-tech applications such as micro-capacitors which are essential to all electronic devices.
Commenting on the news, the broker said:
The additional capacity is anticipated to come online in the middle of CY25 and cost ~$25m to achieve, which is within the previously announced LAMP upgrade budget. LYC currently produces a SEG (samarium, europium, gadolinium) composite, which is sold into China for separation. This additional product suite should provide a value uplift to pricing as LYC captures greater margin from the higher value Dy+Tb products.
Time to buy?
Bell Potter believes that now could be a great time to invest in the ASX 200 mining stock.
Its analysts have responded to the update by retaining their buy rating and lifting their price target to $7.80 (from $7.55).
Based on the current Lynas share price of $5.95, this implies potential upside of 31% for investors over the next 12 months.
To put that into context, a $10,000 investment would be worth approximately $13,100 if Bell Potter is on the money with its recommendation.
While the broker has reduced its earnings estimates this year to reflect weaker than expected rare earth prices, it has boosted its outer year estimates. In addition, it believes the risks are now to the upside for rare earths. The broker concludes:
We have updated our model ahead of the quarterly result, and our target price lifts slightly to $7.80/sh (previously $7.55) as our EV/EBITDA valuation increases with the rolling forward of earnings. EPS estimates reduce by 17% in FY24, 2% in FY25 and 1% in FY26. With risks mounting to the upside for rare earths we retain our Buy outlook.
