Share buyback announced; capital allocation likely unchanged
23 Jun 2026 13:47:16 ET
CITI’S TAKE
Metlen has announced upto €600 million share buyback to be executed over next five years by 2031. We see the share buyback announcement as a regular part of its business based on the historical precedent. Metlen has historically purchased its own shares with majority of such shares used to discharge its share-based compensation liabilities, while the remaining treasury shares were used to onboard strategic investors. We believe that latest share buyback of upto €600 million is in continuation of such practice. We see the capital allocation policy remaining inclined towards growth capex, enabling the company to deliver on its €2 billion EBITDA guidance in medium term. We continue to expect positive FCF for 2026, which should help the company to deliver debt reduction vs last year.
Share buyback should provide flexibility to support shares — we see the announcement for upto €600 million share buyback providing the flexibility to the company to do opportunistic open market purchases and supporting the shares. Under the latest program, a maximum of 14.3 million share implying upto 2.8 million annualized shares can be purchased. Metlen has done share buyback earlier too, which were then used to discharge its share-based compensation and onboarding strategic investors. Based on historical trends, we estimate around 0.5 million share annualized need for share-based compensation.
Capital allocation priorities remain unchanged, positive FCF likely in 2026 — while the share buyback authorization is higher than our estimates for share-based compensation needs, we believe that capital allocation priorities are unchanged. We see the outlook for growth capex remaining unchanged, followed by balance sheet deleveraging. The company has approved €300 million capex for alumina/gallium expansion, part of which will be funded through the capital support from EU. Moreover, the company is on track for base metal pilot plant, following which the final capex approval for industrial scale operations will be confirmed for base metal production.
Company description
Metlen is a diversified Industrial group with primary listing in London and is a FTSE-100 stock. The company has its primary business in Greece with following business verticals: 1) largest fully integrated producer of aluminium in Europe through 100%-owned Aluminium of Greece SA; 2) power portfolio in Greece with 2.4GW installed capacity, mostly thermal and a robust growth pipeline in renewables.
Investment strategy
We rate Metlen Buy. 1) The company is well positioned on the aluminium cost curve, and should benefit from higher aluminium and alumina prices; 2) 100% subsidiary Protergia appears well positioned for an improving Greek energy market, where demand looks set to increase, and lower natural gas prices make thermal a more attractive option for electricity generation. The company is also benefiting from liberalisation of the retail energy market where its strong position as the largest independent and strong balance sheet make it well positioned for new opportunities. 3) Attractive growth proposition with 2.0GW solar power capacity target in Greece and big expansion pipeline for renewable capacities outside of Greece. 4) The company has an attractive pipeline of growth in critical metals with gallium, copper, nickel and cobalt production.
Valuation
Our target price of €52 is based on the average of our DCF-based SoTP NPV valuation and our EV/EBITDA valuation. The NPV approach provides a longer-term view of its growth potential and normalised returns. We calculate the DCF-based enterprise value using a WACC of 9.0% and terminal growth rate of 2%. Thereafter, we reduce EV by net debt and minorities to arrive at our NPV. We apply a blended multiple of 7.5x to our forecast EBITDA (average of 2026-27E), slightly ahead of the stock’s long-term average multiple. This is consistent with our view for stronger earnings in its aluminium business with steady cash flow for power generation, valued at higher multiples than global/European peers.
Risks
The key risks that could prevent the shares from reaching our target price are: 1) Lower LME aluminium prices, a stronger euro (versus USD) and a higher oil price are all negative for AoG profits; 2) Greek politics are uncertain, with the risk of higher taxes and increased regulation, especially in energy. 3) Higher geopolitical risks and softer economies in MTLN’s end-markets could impact sales and new orders; 4) Renewable expansion plans are exposed to risks of project delays, resulting in higher capex and lower returns. 5) With improving balance sheet and the company moving to investment mode there is also the risk that comes with deploying capital in new projects.
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