Scotia’s Mark Neville lowered his Neo Performance Materials Inc. target to $27, above the $26.69 average, from $29 with a “sector outperform” rating, while Stifel’s Ian Gillies cut his target to $21 from $26 with a “buy” rating.
“Given the magnitude of the increase in rare earth prices, we have increased our 2022/2023 estimates by 5 per cent/13 per cent,” Mr. Neville said. “Importantly, the company also indicated its facility in Estonia has been unaffected (to date) by the Russia/Ukraine conflict – i.e., the company is still able to source material (for rare earth separation) from Russia (70 per cent of the feedstock), while working to accelerate shipments from Energy Fuels (UUUU-US; not covered) and exploring opportunities with other suppliers. While hard to handicap the odds of a disruption to the Russian feedstock, it doesn’t sound like the impact would be overly punitive as the rare metals business would be unaffected (50 per cent of the capacity), the company has several months (i.e., more tha n 3 months) of inventory on hand, and Magnequench could source magnetic materials from other suppliers (rather than from Estonia).”