Edison Investment Research Limited
London, UK, 8 September 2021
Mytilineos (MYTIL): The future is bright
Mytilineos has been investing heavily to benefit from the energy transition (as humanity seeks to limit global warming to c 1.5°C). We estimate earnings (EBITDA) derived from energy transition activities will increase from 25% in 2020 to 60% in 2025, which will help drive EPS growth of 16% pa over the period, with Mytilineos continuing to achieve superior returns (c 11% ROCE). In our bull case, we forecast EPS increases by 185% by 2025, implying a 23% CAGR in 2020-25e. Our scenario-based analysis suggests the risk-reward balance is heavily skewed to the upside.
Our per-share valuation of €24.0 (c 50% 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 SOTP peer valuation (c €24/share). In addition, we formulate a bear and bull case that indicates the risk-reward balance is heavily skewed to the upside (c 20%/+130%).
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