Western Rare Earth Magnet Producer Gets Price Target Raised on Strong Q1 Results and Higher 2026 EBITDA Guidance
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Disclosures for Paradigm Capital, Neo Performance Materials, May 12, 2026

DISCLAIMER SECTION Company Ticker Disclosures Neo Performance Materials Inc. NEO-CA 3 Note: Please refer to above table for applicable disclosure numbers. 1. The analyst has an ownership position in the subject company. 2. Paradigm Capital Inc. has assumed an underwriting liability for, and/or provided financial advice for consideration to the subject companies during the past 12 months. 3. Paradigm Capital Inc. expects to receive or intends to seek compensation for investment banking services from the subject companies in the next 3 months. 4. Paradigm Capital Inc. has greater than a 1% ownership position in the subject company. 5. The analyst has a family relationship with an Officer/Director of subject company. 6. A partner, director, officer, employee or agent of Paradigm Capital Inc. is an officer or director of the issuer. Paradigm’s disclosure policies and research distribution procedures can be found on our website at www.paradigmcap.com. Paradigm Capital Inc. research is available on Bloomberg, CapitalIQ, FactSet and LSEG or at www.paradigmcap.com. Issued by Paradigm Capital Inc. Stock Coverage History Date Target Rating Estimates 19-Mar-2026 $31.00 Buy 8-Jan-2026 $26.00 Buy 16-Nov-2025 $24.00 Buy FY25-26 EPS 2-Oct-2025 $24.00 Buy FY25-26 EPS 12-Aug-2025 $20.50 Buy FY26 EPS 9-Jul-2025 $17.00 Buy 18-Nov-2020 $19.00 Buy Initiating Coverage Research Rating System Paradigm Capital Inc. uses the following rating recommendation guidelines in its research: About Paradigm Capital Inc. Paradigm Capital Inc. (PCI) is a research-driven, independent, institutional equity investment dealer focused on sectors and companies that have attractive longterm secular growth prospects. PCI’s research is available on our website at www.paradigmcap.com. Please speak to your Sales or Trading Representative if you require access to the website. The analyst (and associate) certify that the views expressed in this report accurately reflect their personal views about the subject securities or issuers. No part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations expressed in this research report. Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is determined by revenues generated directly or indirectly from various departments including Investment Banking, based on a system that includes the following criteria: reports generated, timeliness, performance of recommendations, knowledge of industry, quality of research and investment guidance and client feedback. Analysts are not directly compensated for specific Investment Banking transactions. The opinions, estimates and projections contained herein are those of PCI as of the date hereof and are subject to change without notice. PCI makes every effort to ensure that the contents herein have been compiled or derived from sources believed reliable and contain information and opinions, which are accurate and complete. However, PCI makes no representation or warranty, express or implied, in respect thereof, and takes no responsibility for any errors and omissions that may be contained herein and accepts no liability whatsoever for any loss arising from any use of or reliance on this research report or its contents. Information may be available to PCI, which is not reflected herein. This research report is not to be construed as an offer to sell or solicitation for or an offer to buy any securities. PCI, its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. PCI may act as financial advisor and/or underwriter for certain of the corporations mentioned herein and may receive remuneration for same. PCI is a member of The Toronto Stock Exchange, The TSX Venture Exchange and The Canadian Investment Regulatory Organization (CIRO). Any products or services mentioned on this website are made available only in accordance with local law (including applicable securities laws) and only where they may be lawfully offered for sale. PCI will not open accounts except in jurisdictions in which it is registered. To U.S. Residents: This report was prepared by PCI which is not subject to U.S. rules with regard to the preparation of research reports and the independence of analysts. PCUS, affiliate of PCI, accepts responsibility for the contents herein, subject to the terms as set out above. Any U.S. person wishing to effect transactions in any security discussed herein should do so through PCUS.

On May 12, 2026, Analyst J. Marvin Wolff of Paradigm Capital reiterated a Buy rating and raised the price target to CA$41.50 from CA$31.00 on Neo Performance Materials Inc. (NEO:TSX; NOPMF:OTCMKTS), implying approximately 39% potential return (including dividend) from the May 12, 2026 closing price of CA$29.89, following strong Q1 results and an improved demand/pricing environment for rare earth materials.

Neo Performance Materials, the largest producer of neodymium permanent magnet powders globally, reported Q1 revenue of US$154.9M, EBITDA of US$36.2M, and EPS of -US$0.04 (US$0.36 adjusted). The adjustment related to US$17.4M assigned to the Buss & Buss non-controlling shareholder derivative liability. Wolff noted that NEO is "the dominant magnet manufacturer in the Western world with strong EBITDA growth bolstered by the strength in hafnium (Hf) pricing."

All three divisions performed well in the quarter. Magnequench saw EBITDA grow to US$9.2M, up 39% year-over-year, supported by bonded magnet growth of 17.2% y/y and powder sales growth of 18.6% y/y. The NARVA magnet plant remains on track to launch 2-3 commercial programs by year-end. Chemicals & Oxides delivered Q1 revenue of US$33.1M and EBITDA of US$7.6M as the new NAMCO facilities increased throughput. Rare Metals posted the strongest performance, with Q1 revenue of US$57.1M and EBITDA of US$23.9M, nearly double the US$12.3M in Q4/25, driven by strong hafnium pricing.

Pricing dynamics remain favorable, with Nd/Pr pricing elevated at US$120/kg but stabilized, supported by Western supply chain initiatives including U.S. Department of War offtake agreements with MP Materials Corp. (MP:NYSE) and Lynas Rare Earths Ltd. (LYC:ASX; LYSCF:OTC) at US$110/kg floor prices. Hafnium pricing has surged to US$13,000/kg, up from US$9,000/kg in December. On the back of this continued strength, management raised 2026 EBITDA guidance to US$100-$110M from US$75-$80M.

Wolff highlighted NARVA's transformative potential, noting that "NARVA Phase 1a and 1b Combined Doubles NEO's EBITDA," with projected NARVA EBITDA of US$45-$56M in 2029 contributing to total NEO EBITDA of US$155-$166M. The 2030 model shows NARVA EBITDA of US$68-$84M and total NEO EBITDA of US$178-$194M. Management now expects NARVA EBITDA margins of 20-25%, higher than the original 10-15% forecast, reflecting strong acceptance of NARVA magnets and the Western-based supply chain advantage.

The Western world EV magnet demand model indicates a total 2025 demand of 18,912 tonnes, exceeding NARVA's Phase 1a + 1b production capacity of 3,750 net tonnes per annum. At higher penetration rates, Western world EV magnet demand could reach 31,950 tonnes, meaning NEO's eventual 20,000 tpa target (four 5,000-tpa plants) would represent only 50% of demand, excluding wind turbine requirements.

NEO maintains a strong balance sheet with US$41.7M in cash and US$155.2M in debt, for net debt of US$113M and net debt-to-EBITDA of 1.1x. Wolff also views NEO as an "Attractive Strategic Global Takeover Candidate," citing its unique position and vast experience in rare earths, combined with its singularly unique Western world-based traction motor magnet capability.

Risks include weak EV volumes in the Western world, the ending of U.S. government EV rebate programs in September 2025, governments pushing out EV mandatory deadlines beyond 2035, and China's continued dominance, consuming 80%+ of global traction motor demand.

Applying a 12x EV/EBITDA multiple (unchanged) to 2029E EBITDA of US$155M (US$121M prior) and a 10% discount rate yields the new CA$41.50 target price. Wolff noted the advanced materials comparable group trades at 16.5x, while rare earth producers MP Materials Corp. and Lynas Rare Earths Ltd. trade at 34x and 27x 2026 EV/EBITDA, respectively. Paradigm's FY26E estimates of US$583.5M revenue, US$109.6M EBITDA, and US$0.61 EPS are above the consensus of US$525.9M, US$79.4M, and US$0.76, respectively.