To The Moon

Each of the three major U.S. indexes fell around 2.5% for the week as stocks failed to maintain momentum from the prior week’s strong gains. At last Friday’s close, the $S&P 500(.SPX)$ was 5.6% below the record level that it set three months earlier.

The best-performing concepts is Precious Metals & Minerals. Considering the different perceptions of the stock, this time TigerPicks chose $Sibanye(SBSW)$ to have a fundamental highlight to help users understand it better.

$Sibanye(SBSW)$

Sibanye Stillwater Limited is a multinational mining and metals processing group headquartered in South Africa. The company operates in the precious metals sector, with a primary focus on platinum group metals (PGMs) and gold. Sibanye Stillwater is one of the world's largest primary producers of platinum, palladium, and rhodium.

Driven by a cyclical shift, cost reductions, and stabilizing PGM prices, SBSW has recently surged 45%, and the rally is expected to continue.

Cost Control Stands Out

Obviously, the FY2024 results for Sibanye haven't been great as their revenue went down by over 4% YoY and gross profit continued to slide lower, losing over 51% on a YoY basis. Selling price was the key driver of that deterioration: The basket price at the South African PGM operations fell by 16% YoY, at the US PGM operations by 21% YoY, and at the US PGM recycling operations by ~46% YoY.

But what helped Sibanye limit the negative impact below gross profit was their continuing cost reduction measures, so the firm closed FY2024 with a great improvement on the EBIT level (the FY2023 loss was ~4x higher), and despite higher net interest expenses for the period, the resulting bottom line showed a great reversal (although it stayed in the negative territory, obviously).

Seeking Alpha, SBSW's IS

The 2H FY2024 EBITDA of ZAR 6.4 billion "marked the third consecutive six-month period of stable EBITDA", as the outgoing CEO Neal Froneman noted on the earnings call, and looking at the past 2 semiannual periods, we see SBSW's gradual normalization in EBITDA generation through better diversification.

Sibanye's IR materials

Delving into the particular segments, I see that Sibanye's SA gold operations showed a spectacular +216% YoY increase in 2H FY2024, contributing ZAR 3.5 billion in H2 alone and just under ZAR 6 billion for the full year. At the current PGM prices, the SA gold operations should generate more than half of the group's EBITDA in 2025, and the incoming CEO, Richard Stewart, said that despite being mature, this segment's assets are well-capitalized and do not require massive CAPEX injections, which is good news.

SA PGM operations showed a 16% YoY decline in the 4E PGM basket prices, as I noted above, so this segment's adjusted EBITDA dropped by about 60% to ZAR 7.5 billion for FY2024. But some of that decline was also exacerbated by a seemingly one-off event: No revenue and earnings were recognized from Kroondal for the last 4 months of FY2024 "due to pipeline build-up", so FY2025 SA PGM results should be much better from this fact alone, in my understanding.

Valuation Looks Too Low

Regarding US PGM operations, the 21% YoY decline in the 2E PGM basket price was a heavy hit, and in addition to that, this segment booked ~$500 million impairment "due to lower long-term palladium price forecasts". The new management wants to keep pushing the all-in sustaining costs (AISC) lower (they plan to reach $1,000/oz in 3 years; now they're at $1,367/2Eoz), so if they do achieve this target, the absence of impairment in future period should theoretically boost the consolidated bottom line.

The newly acquired Reldan, a part of Sibanye's recycling US operations, contributed ~$32 million to the consolidated FY2024 EBITDA, and I think it's just the beginning because the catalytic converter recycling market size is expected to reach ~$16.02 billion by 2032, growing at a CAGR of 6.8%, according to a third-party source.

Overall, I think Sibanye's cost management was well-executed and helped the firm weather the weakness of the ASPs; now that platinum and palladium are projected to be in deficit this year (UBS data proprietary source, May 2025), the PGM prices are likely to normalize further, reigniting SBSW's top line recovery.

Matthey data

Sibanye's reported net debt to adjusted EBITDA ratio was 1.79x as of 2H 2024, with the pro-forma net debt to adjusted EBITDA - "after accounting for the $500 million precious metals stream agreement" (primarily on SA PGM gold byproducts) - dropped to <1.1x. At the same time, Sibanye's liquidity looks strong after it raised ZAR 35.8 billion over 12 months. Also, the Section 45X tax credits under the Inflation Reduction Act, "for 10% of operating costs for critical minerals production and recycling," should give Sibanye massive direct cash payments, effectively lowering their AISC of the US operations.

The more favorable outlook for ASPs and AISC likely led to the massive revisions regarding SBSW's EPS for FY2026; since late January 2025, the consensus FY2026 EPS went up from $0.04 to $0.64. The FY2027 consensus doubled from late February 2025.

Seeking Alpha, SBSW's EPS revisions

Currently, SBSW is trading at a 9.38x FY2025 P/E ratio and less than 5x its FY2026 P/E. At the same time, all Seeking Alpha Quant ratings have reversed from "F" and "D" to "B" and even "A". The cycle might have finally turned around.

Seeking Alpha, SBSW

While I admit that cyclical names usually trade at a steep discount to what is considered normal multiples, SBSW's FY2026 P/E of under 5x is simply too low to be true. There should be a repricing process, in my view, if the recent revisions are there to stay. I think it's fair to assume that SBSW might keep its 7-9x earnings multiple by the end of FY2026. Then, at the current EPS consensus (no premium or discount added), the stock price target amounts to $9.84 based on my calculations.

My calculated price target coincides well with the nearest resistance level, if the stock price manages to hold above the $5-6/share level.

TrendSpider Software, SBSW, notes added

Where Can I Be Wrong?

As I noted in my previous article, the key risks to my bullish thesis are tied to the trend in the auto market, the ICE-to-EV transition, which is indicating decreased demand for palladium and platinum in the very long term. I know PGMs are used outside of the auto industry as well, but in 2020, ~60% of global PGMs were utilized for autocatalysts, according to Visual Capitalist. So it's the key market, and as EVs replace ICEs, the demand should stay under pressure.

Another risk is cyclicality. Current trends suggest that SBSW is undergoing a change in its industry's cycle, which is essentially the core of my thesis update today. But if the tide isn't turning and we are merely seeing short-term relief, SBSW might continue to reach new lows. My technical analysis should also be considered with a skeptical eye.

Final Thoughts

Despite the above risks, I think Sibanye Stillwater is growing for a reason, and its upside potential is much higher than what it has managed to achieve in recent weeks. My valuation and price target calculations for 2026 suggest SBSW's price at ~$9.84, giving potential buyers an upside of >64%. My technical analysis agrees - SBSW should find stable ground above $5-6/share to try to conquer the next resistance level.

Given all that, I reiterate my "Buy" rating on SBSW stock.

Stock Price Forecast:

Here are the target price forecasts for the next 12 months from analysts.

Based on 2 Wall Street analysts offering 12 month price targets for Sibanye Stillwater in the last 3 months. The average price target is $5.55 with a high forecast of $5.60 and a low forecast of $5.50. The average price target represents a -9.61% change from the last price of $6.14.

Resource:

https://seekingalpha.com/article/4789401-sibanye-stillwaters-turnaround-ignites-upside-still-there

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