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METLEN Energy & Metals | London calling, with €2bn EBITDA in sight; Top pick

Capital Markets Day in April to set the tone… – Following another year of sequentially improved results, with FY’24 EBITDA reaching €1.08bn (+8% yoy), 2025 looks poised to be a pivotal year for Metlen, with major announcements expected at the CMD on 28th April, ahead of its planned LSE listing in early Q3’25. During the event, mgmt will unveil the updated 2025-2028 strategy and outline the organic drivers that will lead to the ambitious €2bn EBITDA implied target by 2028 (CAGR: 17%). The above, along with the improved earnings quality in FY’24, have fueled a rally in the stock YTD, following a period of rangebound trading that overlooked the Group’s strong growth profile.

Expansion in Metals secures mid-term segmental EBITDA growth… – Metlen recently announced a €295.5mn investment in Metals, aiming to nearly double its bauxite capacity, lift its alumina output by 45% and enter gallium production through a new 50MT line. This investment is de-risked by a 2-way deal with Rio Tinto that secures the tropical bauxite supply needed for the upgraded alumina production, ensures a committed off-taker for alumina and extends the life of Metlen’s bauxite mines. We estimate the project will deliver >€80m EBITDA from 2028 onwards, implying an ROI of >60%. The Metals segment’s growth prospects are further underpinned by stronger alumina/aluminum prices, the benefits of vertical integration, and efficiencies from in-house electricity sourcing, culminating to an 8% divisional EBITDA CAGR through 2028e.

… as RES & the integrated utility remain at focus… – The deal with PPC, combined with Metlen’s expansive >14GW RES portfolio, has effectively secured asset rotation sales of >1.3GW p.a. through 2027, reinforcing EBITDA predictability. At the same time, Metlen’s operating RES portfolio of 1.4GW (371MW in Greece) is set to expand further and emerge as the primary RES growth driver, strengthening LT earnings visibility. The integrated utility remains the energy segment’s cornerstone, with generation capturing spark spreads of >€30/MWh, supported by market volatility, Metlen’s highly efficient gas units (leading the merit order), and Greece’s shift to net exporter status. Meanwhile, supply will continue acting as a natural hedge against market price fluctuations, with growth primarily volume-driven, as competitive pricing helps Metlen expand its mkt share to 30%. Finally, natural gas trading will continue fostering Group synergies, with Metlen set to maintain its leadership status based on natural gas imports, while a potential spike in TTF prices presents an upside risk to our numbers.

Lifting PT to €51.0 on outer year profit uplift; Top pick with 9% 3Y EBITDA CAGR… – We lower our 2025/26e EBITDA by 5% (but still forecast 6%/10% yoy growth), on higher electricity costs for aluminum, an aggressive pricing strategy in supply, and base effects. On the other hand, we raise our outer-year EBITDA c7% (post 2027e) on improved construction outlook and the metals expansion. As a result, we lift our PT to €51.0 (from €48), with the increase in our LT estimates and the positive effect of the Metals investment more than offsetting the modest downgrade to our 2025-26e. At our PT, Metlen would trade at 7.8x 1yr fwd EV/EBITDA, a premium to the blended peer group (