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METLEN | Forged for higher returns; Buy, top pick

New Metals pillars reshape the investment case… – Metlen’s mid-term roadmap marks a decisive evolution in its business model, with 3 new Metals subsegments—Circular Metals, Critical Metals and Defense—set to redefine its growth mix. Collectively, these new activities are targeted to add c€520m of incremental EBITDA, or >50% of the uplift toward mgt’s €1.9-2.1bn medium-term goal. These platforms carry exceptionally high return metrics (ROIC 30-70%) and complement the existing aluminium value chain, creating a unique industrial ecosystem spanning energy, critical materials and defense manufacturing. In our view, their scalability, capital-light structure and strategic positioning within the EU energy and resource security agendas materially enhance the investment case, anchoring long-duration, high-margin growth.

… resulting in a >20% uplift to our mid-term EBITDA; Protos loss in 2025 only one-off operational setback – Incorporating the new business pillars, we now project a bounce in Group adj. EBITDA to €1.19bn in 2026e (after €970m in 2025e, affected by one-offs) and €1.39bn in 2027e, rising to €1.65bn by 2028e. The latter implies c9% uplift vs. our earlier forecasts, with even more pronounced upgrades in outer years (>20%) propelled by a c€0.4bn contribution from the new segments. This captures c75% of the upside embedded in mgt targets, thus leaving the rest as optionality (with the gap mainly due to our more gradual ramp in Circular). In the short term, we have lowered 2025 EBITDA reflecting the €132m H1’25 loss in MPP stemming from Protos. We view the Protos hit as a contained, one-off event tied to a single complex EPC contract, with no operational read-across to the wider backlog. While the challenges could have been signalled earlier, we take comfort from mgt’s decision to recognise the full impact upfront, strengthen execution controls and adopt a far more selective approach toward similar projects going forward. This provides a clean base for the 2026–28 earnings recovery.

New segments to drive material uplift in ROIC… – We view the new Metals activities as a structural driver of returns, with group post-tax ROIC rising from 11% in 2025e to 16% by 2029e as higher-margin platforms scale. Crucially, we expect FCF to turn positive from 2026e as rising profits and the asset rotation strategy should help offset peak investment capex (c€1.35bn in 2026e). We see much stronger dynamics as capex normalizes, with Metlen delivering FCF of c€0.3bn and c€0.8bn in 2027-28e, although this also hinges on asset rotation timing. With leverage already manageable and net debt/EBITDA set to enter a downward path from next year (after a peak at 3.1x in 2025e on a consolidated basis) thanks to the EBITDA re-set, Metlen should be able to self-fund growth while maintaining dividend capacity, marking a transition from expansion to cash generation. This combination of rising ROIC and FCF inflection strengthens the company’s value-creation cycle and supports a progressive capital return profile.

Lifting PT to €62; top pick, 17% EBITDA CAGR in 2025-29e – The material uplift to our medium-term EBITDA estimates coupled with higher ROIC raise our PT to €62 (€51 previously), placing the stock at 9.7x 2026e EV/EBITDA, which however falls rapidly to