Metlen Energy & Metals — Strengthening operating margin in H1

Metlen Energy & Metals (ASE: MYTIL)

Last close As at 13/12/2024

EUR33.80

0.72 (2.18%)

Market capitalisation

EUR4,727m

More on this equity

Research: Industrials

Metlen Energy & Metals — Strengthening operating margin in H1

Metlen Energy & Metals achieved a record H1 EBITDA of €474m in 2024 (vs €437m in H123), while also increasing its operating margin by 169bp to 19.1% (17.4% at H123). Revenue declined marginally (-1% to €2,482m) but Metlen’s diversified and synergistic business model across the energy and metals sectors is helping to grow its margins and diversity of earnings (towards RES/Utility/Metals and away from volatile natural gas supply). Both net profit after minorities and earnings per share increased by c 5% y-o-y to €282m and €2.04, respectively. Net debt/EBITDA is a comfortable 1.76x and Metlen looks well placed for a potential upgrade to investment grade status by the rating agencies later this year, achieving its goal.

Written by

Andrew Keen

MD - Head of Content, Energy & Resources, Industrials

Industrials

Metlen Energy & Metals

Strengthening operating margin in H1

H124 results

Industrials

29 July 2024

Price

€36.2

Market cap

€5.2bn

Net debt (€m) at end H124

1,774

Shares in issue (excluding share buyback)

138.4m

Free float

78.5%

Code

MYTIL

Primary exchange

ASE

Secondary exchange

N/A

Share price performance

Business description

Metlen Energy & Metals is a global industrial and energy company, operating in two main business segments: Energy and Metallurgy. Metlen is strategically positioned at the forefront of the energy transition as an integrated utility, while also having a successful, fully vertically integrated, green metallurgy business. Metlen’s strengths are from its synergies across the entire business, aiding the company’s objective of becoming a global leader.

Next events

9M24 results

24 October 2024

Analysts

Andrew Keen

+44 (0)20 3077 5700

Harry Kilby

+44 (0)20 3077 5724

Metlen Energy & Metals is a research client of Edison Investment Research Limited

Metlen Energy & Metals achieved a record H1 EBITDA of €474m in 2024 (vs €437m in H123), while also increasing its operating margin by 169bp to 19.1% (17.4% at H123). Revenue declined marginally (-1% to €2,482m) but Metlen’s diversified and synergistic business model across the energy and metals sectors is helping to grow its margins and diversity of earnings (towards RES/Utility/Metals and away from volatile natural gas supply). Both net profit after minorities and earnings per share increased by c 5% y-o-y to €282m and €2.04, respectively. Net debt/EBITDA is a comfortable 1.76x and Metlen looks well placed for a potential upgrade to investment grade status by the rating agencies later this year, achieving its goal.

Year end

EBITDA
(€m)

Net income
(€m)

EPS
(€)

DPS*
(€m)

P/E**
(x)

Yield**
(%)

12/24

823

466

3.42

1.20

4.6

7.6

12/23

1,013

605

4.46

1.58

8.3

4.3

12/24e

1,107

666

4.81

1.69

7.5

4.7

12/25e

1,171

709

5.12

1.80

7.1

5.0

Note: *Final distributed dividend per share. **FY22 and FY23 at the year-end price; FY24e and FY25e at last close price.

Metlen’s renewable energy source (RES) business continues to grow, with H1 EBITDA up by 61% y-o-y, which accounts for c 30% of the company’s total EBITDA in H1. This was helped by the effective execution of Metlen’s asset rotation model, with the sale of 531MW of photovoltaic projects and this capital recycled to fund further growth of its RES business. Metlen’s market share in Greece’s domestic power generation has grown year-on-year, reaching 16.7% at H124, from 12.8% H123. The company is aiming to reach 20% by the end of 2024 and has ambitions to reach 30% in the future. Metlen’s total generation capacity increased by 73% yoy in H124, reaching 4.2TWhs, with 81% of this increase arising from thermal plants (primarily due to operation of its new combined-cycle gas turbine unit) and 14% coming from RES.

Metlen’s metals business also achieved a record H1 EBITDA (up by 4% y-oy to €142m), despite a revenue decline of 14% y-oy. Aluminium prices were relatively flat (H124 average three-month LME price of $2,402/t vs H123’s price of $2,362/t). Profitability was supported by Metlen’s fully integrated business model, as smelting production costs fell due to lower power prices and alumina profitability was helped by stronger alumina prices (up c 14% y-oy), and by Metlen continuing to grow its integrated bauxite supply.

Management stated that ‘confidence has grown’ in full-year results being ‘easily within the range’ of the targets set at the AGM in June (EBITDA of €1.0–1.2bn and net profit of €600–700m). Our forecasts and valuation for Metlen remain unchanged from our previous note. Metlen’s earnings are typically weighted towards the second half of the year (the Q3 summer months boost power demand). Over the last four years, the H1/H2 EBITDA split has averaged 42%/58% for the full year. Therefore, assuming a similar weighting for H224, Metlen remains on track to achieve our FY24e EBITDA forecast of €1,107m. We value Metlen at €49 per share, with a DCF of €47 per share and a peer multiple valuation of €51 per share. Metlen still trades on a relatively low, in comparison to peers, FY25e P/E of 7.1x.

General disclaimer and copyright

This report has been commissioned by Metlen Energy & Metals and prepared and issued by Edison, in consideration of a fee payable by Metlen Energy & Metals. 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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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 2024 Edison Investment Research Limited (Edison).

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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

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United Kingdom

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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.

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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 Metlen Energy & Metals and prepared and issued by Edison, in consideration of a fee payable by Metlen Energy & Metals. 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 2024 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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