General Discussion, page-2100

Breakeven On The Horizon For Syrah Resources Limited (ASX:SYR)

Syrah Resources Limited (ASX:SYR) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Syrah Resources Limited, together with its subsidiaries, engages in the exploration, evaluation, and development of mineral properties in Australia, China, Europe, India, the Americas, and internationally. The company’s loss has recently broadened since it announced a US$85m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$114m, moving it further away from breakeven. The most pressing concern for investors is Syrah Resources' path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Syrah Resources

According to the 4 industry analysts covering Syrah Resources, the consensus is that breakeven is near. They expect the company to post a final loss in 2025, before turning a profit of US$26m in 2026. Therefore, the company is expected to breakeven roughly 2 years from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 70%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth

Underlying developments driving Syrah Resources' growth isn’t the focus of this broad overview, however, bear in mind that typically metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we would like to bring into light with Syrah Resources is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Syrah Resources' case is 48%. Note that a higher debt obligation increases the risk in investing in the loss-making company.