Mytilineos operates three main businesses: metallurgy (aluminium/alumina production), power & gas (power production/supply and gas trading) and large-scale infrastructure EPC. It operates in 29 countries across Europe, the Middle-East and Africa and has 2,700 employees.
We expect H119 results to show strong EBITDA growth for the group (up 23% y o y), with the power & gas business a key driver (EBITDA up almost three times y o y). We see several growth opportunities in the Greek power and gas market for Mytilineos and the election results may accelerate its growth plans. Furthermore, we believe the recently announced construction of a new power plant is likely to achieve high returns and drive further growth. Despite the recent re-rating, the stock remains attractively priced, offering 12–14% pa free cash flow yield in FY19–22e.
Although Mytilineos operates in highly competitive international markets, it has leveraged the synergies between the three divisions to build a portfolio of assets that have in common a low-cost, competitive positioning. Cost leadership is the key feature the three businesses have in common. In particular, the highly efficient gas-fired plants and the access to cheap natural gas allow the Power & Gas business to achieve high load factors and higher-than-average margins. Production costs for both alumina/aluminium allow Metallurgy to be profitable and strongly cash flow generative. The EPC business has a track record of stable and relatively high margins.