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Assessing Lynas Rare Earths (ASX:LYC) Valuation After China’s Latest Export Restrictions

Simply Wall St · 5d ago

China’s latest export restrictions on military use items to Japan, which include rare earth related products, have pushed Lynas Rare Earths (ASX:LYC) back into focus for investors watching non Chinese supply chains.

See our latest analysis for Lynas Rare Earths.

The latest China export curbs arrive as Lynas Rare Earths trades at A$14.24, with a 7 day share price return of 14.47% and a 30 day share price return of 10.13%. This follows earlier weakness that left the 90 day share price return at a 28.12% decline, while the 1 year total shareholder return of 107.88% and 5 year total shareholder return of 227.36% point to strong longer term gains and suggest momentum has recently picked up again.

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With Lynas trading at A$14.24, sitting below its indicated intrinsic value and modestly under analyst targets, the key question now is simple: is this pricing in the rare earths story ahead or leaving a genuine opportunity on the table?

Most Popular Narrative: 9.7% Undervalued

Compared with Lynas Rare Earths’ last close at A$14.24, the most followed narrative points to a fair value closer to the mid A$15s, framing today’s price as a discount that relies heavily on future execution.

The analysts have a consensus price target of A$12.55 for Lynas Rare Earths based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$17.5, and the most bearish reporting a price target of just A$7.65.

Read the complete narrative.

Curious what has to happen for Lynas to support that higher fair value? The core assumptions hinge on rapid revenue expansion, sharply higher margins and a future earnings multiple that stays elevated. The exact hurdles are baked into the narrative model.

Result: Fair Value of $15.77 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this hinges on rare earth prices holding up and Lynas hitting ambitious expansion and margin targets. Any regulatory or project delays could quickly challenge that optimistic setup.

Find out about the key risks to this Lynas Rare Earths narrative.

Build Your Own Lynas Rare Earths Narrative

If you look at the numbers and reach a different conclusion, or simply prefer to test your own assumptions, you can build a personalised view in just a few minutes with Do it your way.

A great starting point for your Lynas Rare Earths research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.