Mytilineos operates three main businesses: metallurgy (aluminium/alumina production), power & gas (power production/supply and gas trading) and large-scale infrastructure EPC. It operates in 29 countries across Europe, the Middle-East and Africa and has 2,700 employees.
Mytilineos leverages its strong competitive positioning to generate robust cash flow (FCF yield of 14–16% in 2019–22e), supporting both dividends (c 4% FY18 yield with 13% CAGR) and large growth investments with potentially double-digit returns, which could boost current EBITDA by c 50% (in addition to our current forecasts). The stock trades at more than a 40% discount to other European diversified industrial companies on P/E and EV/EBITDA and at more than a 40% discount to a SOTP based on international peers’ multiples.
Although Mytilineos operates in highly competitive international markets, it has leveraged the synergies between the three divisions to build a portfolio of assets that have in common a low-cost, competitive positioning. Cost leadership is the key feature the three businesses have in common. In particular, the highly efficient gas-fired plants and the access to cheap natural gas allow the Power & Gas business to achieve high load factors and higher-than-average margins. Production costs for both alumina/aluminium allow Metallurgy to be profitable and strongly cash flow generative. The EPC business has a track record of stable and relatively high margins.