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Sylvania Platinum - Stellar production, guidance beaten

Sylvania Platinum reported excellent production results offset by weak PGM prices. The platinum group metal (PGM) basket price dropped 28% y-o-y because of recessions in Europe and economic turmoil in China. This has resulted in low demand for PGMs especially from China, which is the world’s biggest consumer of PGMs, and de-stocking by Western OEMs. However, Sylvania has been able to limit its FY23 EPS decline to 17.5% through increased production and has kept its dividend payout of 8p per share. Sylvania entered into a JV (Edison report of 29 August), which will see it process PGMs and chromite from chrome ores and will for the first time see Sylvania receiving a chromite concentrate revenue stream on its own account. The 8p/share dividend declared, a ~10% dividend yield, was in line with our forecast. Basic EPS at 17.01c/share was ~6% lower than our forecast. The stock is inexpensive relative to our valuation, especially because of its low risk, in our view, in terms of safety, lower execution risks, labour component and its overall low-cost operating model relative to its peers. Entry into the chromite market could add significant upside if current historically high prices continue.