SALES COMMENTARY NOT RESEARCH  Concordia Genuity SYR DecQ Q4...

SALES COMMENTARY NOT RESEARCH  Concordia Genuity

 

SYR DecQ

 

• Q4 graphite production of 33kt, ahead of our estimates of 26kt. Variance due mainly to better than expected plant throughput following the fire in the plant during Oct/Nov 2018). Recoveries up QoQ to 70-% (CGe 72%). CY2018 production of 104kt in line with downgraded guidance. Commercial production declared effective 1 January 2019
• Sales – 37kt (CGe 40kt) – DecQ product weighted price lower than SepQ due to product mix (more fines vs higher priced coarse)
• Fines pricing remains under pressure, especially in China
• BAM project – first spherical produced last year, with first purified product expected in Q1 (batch volumes for product qualification). Feasibility completed for 10-40ktpa capacity but capex needs optimising.
• Cash – US$77m (in line).
• Guidance (critical data points)
  • CY2019 production ~250kt (CGe 245kt); Q1 – 45-50kt (slightly below our 54kt)
  • Cash costs – Q1’19 ~US$550/t trending down to US$400/t over CY19 (CGe CY19 US$603/t)
  • Pricing Q1’19 – US$500-600/t. Below our forecast US$680/t, due mainly to product mix (fines vs coarse)

 

Comments:Key data points relate to CY19 guidance on pricing with commercial productionexpected to deliver greater transparency on costs and pricing. Firm guidanceprovided for 1H, with higher costs and lower pricing showing little margin. SYRexpects both to improve over 2019 – we think an improved product mix is keywith SYR’s bias towards fines graphite leaving it more exposed to lessfavourable market conditions in China.

Wehave a SPEC BUY rating and $3.45 target.