Lynas Rare Earths Ltd (ASX: LYC) shares will be on watch next week.
That's because the rare earths producer is scheduled to release its FY 2023 results on Tuesday 29 August.
But what should investors be looking out for? Let's take a look at what one leading broker is forecasting.
Lynas FY 2023 results preview
According to a note out of Goldman Sachs, its analysts are expecting Lynas to deliver a soft result compared to what it reported a year ago.
The broker is expecting revenue of $765 million for the 12 months, down 16.8% year on year. This reflects a 25% decline in its average selling price to US$33 per kg.
Goldman is also expecting Lynas' costs to go in the wrong direction in FY 2023. It is forecasting cash costs of A$25 per kg, up 25% year on year.
The sum of the above means an underlying EBITDA margin of 47%, down from 65% a year earlier. As you would expect, if this is accurate, it is going to crunch Lynas' earnings.
Goldman expects the company's underlying EBITDA to fall 40% to $362 million and its underlying profits to drop 48.2% to $280 million.
No dividend is expected to be paid for FY 2023.
Are Lynas shares good value?
As things stand, Goldman is sitting on the fence with Lynas shares. It currently has a neutral rating and a $6.60 price target on them.
This implies a potential downside of approximately 7% for investors over the next 12 months.
Goldman commented:
Fairly valued: the stock is trading at ~0.9x NAV (A$7.27/sh) based on our long run US$80/kg (real $, from 2027) NdPr price forecast, but on 18x NTM EBITDA. At spot NdPr pricing of US$65/kg, LYC FY24E EBITDA would reduce by 25% to ~A$230mn and NAV to ~A$6.6/sh.
