Hi, Syrah is no more an exploration company, it is now a producer and therefore the market will judge it by its realized sales, revenue and earnings and not by hype nor future expectations/potential/size and growth of the graphite market. Syrah is now valued at 1 Billion$ (at a reasonable max 15x earnings multiple valuation for an industrial minerals company Syrah is now valued at around 66M$ per year earnings).
Now we know markets could stay irrational (vast divergence between fair valuation and stock market price) for a long period of time, however assuming the market will behave rationally in 12 months timeline there are IMO 2 likely scenarios by the end of 2018 :
1- Syrah will justify and exceed through earnings its current valuation. This means Syrah will earn more than 65M$ of profits in 2018. Assuming average price per tonne (mostly small flakes) is 750$ and realistically achievable costs per tonne are 400$ that is 350$ profits per tonne. They need to sell this year 185.000 tonnes of graphite to justify the valuation. I would say very unlikely.
2- Syrah will not justify its current valuation. The stock price will take a hit. This is more likely IMO.
But again who knows, markets could stay irrational for very very long time, the market may provide syrah with more time if they achieve tens of thousands of tonnes of sales this year. Time will tell.
SYR Price at posting:
$3.47 Sentiment: None Disclosure: Not Held
(20min delay)
