Sylvania Platinum - Long-term PGM price upside

Sylvania's Q424 results were negatively affected by a delayed recovery in production following the 22-day strike during Q324. This resulted in 21% lower revenue than expected and EBITDA of only US$2.8m, 68% below our expectation. We have reduced our near-term platinum group metals (PGM) price assumptions on the back of elevated surface inventories and sustained South African production, but bolstered our long-term forecasts due to an expected higher demand for platinum and palladium on the back of fibreglass, hydrogen economy and hybrid vehicle demand. We forecast a recovery in production for Sylvania from FY25 with somewhat higher costs after the recent US dollar depreciation. We have cut our EPS estimates by 17.3% in FY25 and 25.7% in FY26, but see a positive impact from our higher long-term PGM forecasts thereafter. As a result, we have reduced our valuation by 6.5% from 120p/share to 112.2p/share. With exploration assets valued at book and conservatism in our Thaba joint venture (JV) valuation, our overall valuation offers upside as projects graduate from exploration to production over the coming years.

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