Lynas Rare Earths Ltd (ASX: LYC) shares have been strong performers over the past 12 months.
During this time, the ASX 200 mining stock has risen just over 100%.
In light of this, it may not come as a surprise to learn that one leading broker believes its shares are now in danger of pulling back meaningfully.
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What is the broker saying about this ASX 200 mining stock?
Bell Potter notes that Lynas has recently released its new strategy for 2030.It summarises the strategy as follows:
LYC highlighted the 'Towards 2030' strategy which includes two pillars 1) Harvest: returns through optimisation of the Lynas 2025 strategy and ramping current capacity in-line with current demand and 2) Grow: adding resource and scale, increasing separation capacity and expanding into the downstream ex-China metal and magnets sector. Following the A$750m placement the business has ~A$902m in liquidity, addressing issues of balance sheet stress and providing a platform to begin funding its strategic goals.
Details on expansion potential are vague, which makes assessing the likely capital requirements of various ventures difficult. Reading between the lines: Seadrift is delayed until the US Govt comes to the table on funding, which pushes out 1.5ktpa in NdPr processing capacity, potentially Malaysia could expand downstream separation which would bring group production up to 12ktpa, however this would be later in the decade we suspect.
As a result, the broker hasn't seen enough to change its recommendation, though it has boosted its valuation a touch. Nevertheless, its new price target still implies significant downside risk from current levels.
Lynas shares tipped to sink
According to the note, the broker has retained its sell rating with an improved price target of $9.35 (from $7.65).
Based on its current share price of $14.27, this suggests that its shares could tumble almost 35% between now and this time next year.
Commenting on its sell recommendation, Bell Potter said:
Our Target price increases to $9.35/sh (previously $7.65), and we maintain our Sell recommendation. We do recognise that the current themes pushing LYC higher are likely to persist as tailwinds over the short term. We have seen the US play its hand with the MP Materials deal; this could form a blueprint for other sovereign investments. Despite this, we believe LYC is priced for perfection, with little room for error. EPS changes in this report: FY26 -8%, FY27 -7%, FY28 -15%.
