MP Materials Corp
MP Details
MP Materials Corp (NYSE: MP) is the leading producer of rare earth materials in the Western Hemisphere.
Financial Results for Q1FY22
- During the quarter, the company reported revenue growth of 177% to $166.3 million, compared to the prior corresponding quarter. Sales were driven by an increase in the realized price of rare earth oxide in concentrate and metric tons.
- Net Income grew by 431% to $85.6 million in Q1FY22.
- Adjusted diluted EPS increased by 285% y-o-y to $0.50.
Source: Company Reports, Analysis by Kalkine Group
Outlook
The company’s strategy revolves around leveraging the low-cost position in order to maximize the earnings power in all the commodity price environments. The company’s Fort Worth facility would be having the capacity to produce ~1,000 tonnes of neodymium-iron-boron (or NdFeB) magnets per year. This could support the production of ~500,000 EV traction motors. Apart from the EVs, NdFeB magnets are crucial inputs to robots, wind turbines, drones, defense systems as well as several other high-growth technologies.
Key Risks
The COVID-19 pandemic could severely impact the company's business and MP is operating in a highly competitive industry. Notably, industry consolidation could lead to higher competition, which could impact its revenue.
Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)
Stock Recommendation
Over the last one year, the stock has given a return of ~42.52%. The stock is trading lower than the average price of 52-week low-high range for the stock at $26.00-$60.19, respectively.
The stock has been valued using EV/Sales multiple based illustrative relative valuation method and the target price so arrived reflects a rise of low double-digit (in percentage terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average) (approx) considering the decent outlook as well as focused strategy.
Considering the current trading levels and risks associated, we are of the view that it is prudent to book profits at the current levels. Hence, we give a “Sell” rating on the stock at the current price of $40.35 per share, as on 9.34 am New York Time, USA (GMT-4) as of 01 June 2022.
Technical Overview:
Daily Price Chart
Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)
MP Materials Corp (MP) is a part of Kalkine’s Global Fully Charged Product
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
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