On Tuesday, Morgan Stanley adjusted its stance on Sibanye-Stillwater (SGL:SJ) (NYSE: SBGL), reducing the mining company's price target to ZAR 2,000 from the previous ZAR 2,100. Despite the change, the firm maintained an Underweight rating on the stock.
The adjustment follows the recent publication of Sibanye-Stillwater's full-year 2023 financial results. Morgan Stanley's revised outlook reflects a decrease in estimated earnings before interest, taxes, depreciation, and amortization (EBITDA) for the fiscal years 2024 and 2025 by 3% and 9.5%, respectively.
The revisions were based on higher-than-anticipated unit costs at the company’s South African and U.S. platinum group metals (PGMs) operations, as well as at the Stillwater mine, which is now projected to have reduced production levels.
The firm also altered its earnings per share (EPS) forecasts for Sibanye-Stillwater, with a projected increase of 8% for the fiscal year 2024, but a decrease of 7% for 2025. These changes are attributed to the same cost and production issues, in addition to a higher net debt than previously expected, which is likely to impact finance costs.
Morgan Stanley noted that the substantial impairments recorded by Sibanye-Stillwater in the fiscal year 2023, amounting to R47.4 billion, are expected to lead to a lower depreciation charge. This adjustment is anticipated to boost the company's earnings per share for the fiscal year 2024.
Despite these near-term adjustments, Morgan Stanley expressed concern over significant downside risks to their forecasts based on current market conditions. The 5% reduction in the price target to ZAR 20 per share reflects these concerns, although there has been no change to the firm's overall recommendation for the stock.
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