Mytilineos — Benefiting from diversity and internationalisation

Metlen Energy & Metals (ASE: MYTIL)

Last close As at 15/06/2024

EUR35.84

−0.76 (−2.08%)

Market capitalisation

EUR5,230m

More on this equity

Research: Industrials

Mytilineos — Benefiting from diversity and internationalisation

Mytilineos released strong Q123 results on 4 May, despite scheduled maintenance in its power business and Q1 being a typically weaker quarter. The year 2023 is likely to be H2 weighted, because scheduled maintenance at Mytilineos’s Ag. Nikolas plant is now complete and its new highly efficient power plant is entering full commercial operation. This strong performance during a period of low energy and metal prices reinforces our view that our FY23 estimates are conservative. EBITDA of €225m was 24% of our FY23 estimate (€931m) and EPS of €1.04 was 27.5%. Net profit after minorities of €143m was up 113% year on year. These results reflect the underlying change to Mytilineos’s synergistic business model to focus on two key activities: Energy (renewables, electricity generation and natural gas supply) and Metallurgy. H223 will see the full operation of its gas plants and continued rollout of renewables – the latter a key focus of its >€2bn capex programme over the next three years.

Written by

Andrew Keen

MD - Head of Content, Energy & Resources, Industrials

Mytilineos_resized

Industrials

Mytilineos

Benefiting from diversity and internationalisation

Q123 results

General industrials

5 May 2023

Price

€25.80

Market cap

€3,687m

Net debt (€m) at 31 March 2023

948

Shares in issue

135.8m

Free float

70.5%

Code

MYTI

Primary exchange

ASE

Secondary exchange

N/A

Share price performance

Business description

Mytilineos is a leading industrial company with an international presence in all five continents. The company is active in Energy and Metals (integrated aluminium smelting). Its renewable energy business is growing strongly organically, helped by European policy initiatives.

Analysts

Andrew Keen

+44 (0)20 3077 5700

Harry Kilby

+44 (0)20 3077 5724

Mytilineos is a research client of Edison Investment Research Limited

Mytilineos released strong Q123 results on 4 May, despite scheduled maintenance in its power business and Q1 being a typically weaker quarter. The year 2023 is likely to be H2 weighted, because scheduled maintenance at Mytilineos’s Ag. Nikolas plant is now complete and its new highly efficient power plant is entering full commercial operation. This strong performance during a period of low energy and metal prices reinforces our view that our FY23 estimates are conservative. EBITDA of €225m was 24% of our FY23 estimate (€931m) and EPS of €1.04 was 27.5%. Net profit after minorities of €143m was up 113% year on year. These results reflect the underlying change to Mytilineos’s synergistic business model to focus on two key activities: Energy (renewables, electricity generation and natural gas supply) and Metallurgy. H223 will see the full operation of its gas plants and continued rollout of renewables – the latter a key focus of its >€2bn capex programme over the next three years.

Year
end

EBITDA
(€m)

Net income*
(€m)

EPS**
(€)

DPS***
(€)

P/E****
(x)

Yield****
(%)

12/21

359

180

1.19

0.42

12.2

2.9

12/22

823

466

3.41

1.20

4.6

7.6

12/23e

931

520

3.77

1.32

6.4

5.4

12/24e

1,048

595

4.31

1.51

5.5

6.3

Note: *Reported. **Number of shares is adjusted for the company’s ongoing buyback scheme. ***Final distributed dividend per share. ****At average share prices in 2021/2022.

Q1 saw the continued roll out of renewable energy projects, with the commissioning of a 43MW wind park and the acceleration of the Greek wind portfolio (0.6GW) towards maturity. In addition, the construction of the first part (135MW) of the c 1.5GW pipeline of photovoltaics is progressing well, with the use of resource from the Recovery and Resilience Fund (at very favourable terms).

EBITDA for the energy sector overall was €150m, up 95% year on year. The diversification into renewables has clearly helped, as has Mytilineos’s presence in supplying both electricity and natural gas. Thermal production was 0.8TWh in Q1, down 41% year on year due to the planned maintenance of its Ag. Nikolaou combined cycle gas turbine (CCGT), but the restart of this plant and its new, highly efficient, 826MW CCGT should boost power production in the rest of the year.

Aluminium results were notably strong, with Q1 EBITDA of €74m up 35% year on year despite a 25.1% year-on-year decline in aluminium prices. Q1 EBITDA was 28% of our FY23 estimate of €262m. Production was relatively flat (up 0.8% year on year), with gains coming from backwards integration into power, lower energy costs and timely forward sales on both metal prices and $/€ exchange rates.

Adjusted net debt at end Q1 was €948m, up from €716m at the end of 2022. Adjusted net debt/EBITDA was 1.03x in Q1 and Fitch recently upgraded Mytilineos debt to BB+, one notch below investment grade.

If, as we forecast in our last note, EBITDA can be maintained at over €1bn/year from FY24, we determine a valuation of €36/share (€5.0bn) (based on a 10-year discounted cash flow analysis). Mytilineos will hold its AGM on 2 June, which may provide further indication of the structural acceleration in earnings.

General disclaimer and copyright

This report has been commissioned by Mytilineos and prepared and issued by Edison, in consideration of a fee payable by Mytilineos. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Mytilineos and prepared and issued by Edison, in consideration of a fee payable by Mytilineos. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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