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Edison Investment Research Limited
London, UK, 20 September 2022
Mytilineos (MYTIL): Profiting from energy transition Mytilineos is well placed to benefit from several energy transition-related themes. Mytilineos’s proactive management team has shown foresight in its investment decisions on decarbonisation over the last few years. It has built a renewable portfolio of c 8.6GW, including 2.4GW in Greece and 6.2GW of international projects that are mostly being developed for sale; it is decarbonising its integrated aluminium production facility, such that it should benefit from ‘low carbon’ aluminium branding from 2025; and it is increasing its activities in sustainable infrastructure projects. We estimate the share of earnings (EBITDA) derived from energy transition activities will increase from 26% in 2021 to 57% in 2025 (and 60% from 2026), which will help drive a four-year group EPS CAGR of 18%, with Mytilineos continuing to achieve superior returns (c 14% ROCE). It is well funded to support its investment in the energy transition, with financial flexibility of c €1.5bn augmented by strong operating cash flow in all business areas.
Our per-share valuation of €27.0 (c 85% above the current share price) is based on a 10-year discounted cash flow (DCF) methodology, which better reflects Mytilineos’s growth prospects under the energy transition. We cross-check with a sum-of-the-parts peer valuation, which implies a valuation of €27.8/share, 3% above our DCF valuation.
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