Sibanye Stillwater Stock: A Cyclical Swing Underway

Investment Thesis - Despite significant risks, Sibanye Stillwater Limited (SBSW) is expected to experience a cyclical upward trend in the medium term, moving away from the ongoing correction since February 2022 [1] Financial Performance - SBSW reported a drastic decline in adjusted EBITDA, falling over 74% year-on-year in Q1 2024, with a loss before royalties and taxes of -$634 million compared to a profit of $5.6 billion in Q1 2023 [2] - The company is facing liquidity issues and is in discussions with lenders to raise covenants following the sharp drop in earnings [6] Restructuring Efforts - The company is actively restructuring by closing unprofitable shafts, including the Kloof 4 shaft in November 2023 and the Simunye shaft in February 2024, with further closures planned for April 2024 [4] - Expected savings from these restructuring efforts are projected to be around $375 million through systematic cost reductions and deferrals of major investment projects [4][5] Market Dynamics - Prices for key PGM metals, particularly platinum, have begun to recover, which may support SBSW's financial recovery despite concerns over demand due to the shift to electric vehicles [10][11] - The market's negative perception of future prospects has led to significant reductions in EPS forecasts for FY2024 and beyond, indicating a cautious outlook [8] Valuation Metrics - SBSW's current valuation shows a forward EV/Sales ratio below 1x, which is half the sector norm, and a forward EV/EBITDA ratio around 4.5x, also about half the sector's median, suggesting potential growth [14] - The stock is trading at a high forward P/E of nearly 30x, indicating a challenging valuation environment despite the potential for recovery [14] Stock Price Outlook - The stock has shown signs of breaking the downward trend, with potential price levels projected between $8 to $8.50 per share, indicating a possible upside of nearly 42% from current levels [13] - The recent positive market reaction to poor financial results suggests that the stock may have reached its bottom, leading to expectations of continued growth in the medium term [20]