Lynas hits record revenue, expects accelerated demand next quarter

Sustained demand for rare earths has pushed NdPr prices above the symbolic US$100/kg mark for the first time since 2011. The world’s second largest producer, Lynas Rare Earths (ASX: LYC) is positioned front and centre. 

For the December 2021 quarter, Lynas reported a 66.7% quarter-on-quarter (QoQ) jump in revenue to $202.7m. This was underpinned by a 21.1% QoQ increase in average selling price of its rare earth oxides to $54/kg.

A year ago, the average selling price was just $29.5/kg. 

The quarterly report said that customers were focused on securing rare earths supply rather than skyrocketing prices. 

Lynas expects favourable market conditions to continue, as its customers have indicated an “accelerated demand [of rare earths] in the next quarter”. 

Lingering challenges 

Strong top line growth and sales has struggled to trickle down to Lynas’ bottom line, weighed by supply chain disruptions. 

Lynas said its transit time for concentrate shipped from Fremantle, WA to Kuantan, Malaysia has increased from 15 days in March 2021 to 33 days in December 2021. 

To mitigate the delays, Lynas is opting for charter ships that come at additional costs. 

The company reiterates that the costs are “outweighed by the benefit of ensuring continuity of supply to our customers.”

What brokers think 

Macquarie is one of few brokers that cover the stock. Its latest note dates back to 9 December 2021. 

Macquarie rates Lynas as an Outperform with a $12.20 price target (10.1% upside). 

The completion of Lynas’ Kalgoorlie Project was viewed as a major de-risking event.

As part of Lynas' operating licence agreement with the Malaysian government, the company must complete its Kalgoorlie cracking and leaching plant before July 2023.

Head above the clouds 

Lynas has been the gift that keeps on giving, cracking the symbolic $10 level on 30 December 2020. 

The stock is up 148% in the last 12 months, with most of its gains occurring between October and November last year.

The stock has managed to eke out a small gain on Wednesday, despite overnight interest rate concerns sparking a sharp selloff across growth-related stocks.

Lynas' large cap lithium neighbours are taking the plunge, with Pilbara Minerals (ASX: PLS) is sliding -3.8% and Allkem (ASX: AKE) is down -4.9%.