Metal business is continuing to be steady, growth drivers ahead — Metal business delivered stable production for alumina and aluminium, while the EBITDA increased to €149 million, 16% higher vs last year and 5% ahead of our estimates. The business benefitted from strategic metal hedging, offsetting the weakness in spot alumina prices. We expect the aluminiuum pricing to help 2H’26 earnings to be sequentially better. Metlen has also announced gallium offtake agreement at significantly higher fixed pricing, which could potentially help deliver triple digit EBITDA from gallium volumes alone. The plant is likely to ramp up in 2028.

Higher margins in generation, renewable pick up in 2H’26 — Thermal power generation at 4.0 TWh was helped by summer demand surge in Q2’26 and came in largely inline to our estimates. Utility EBITDA at €215 million increased vs last year as the company increased its gas sourcing volumes, which also had positive read across for margins in the generation business. Renewable business at €116 million EBITDA stayed at lower levels, without adverse headlines from legacy EPC. Asset rotation should pick-up in 2H’26, driving the normalisation of renewable earnings.

Solid evolution of infrastructure earnings — Revenue for the infra business increased 74% to €368 million, while EBITDA at €82 million more than doubled. The company is guiding for the earnings to stay robust, helping to deliver the CMD guidance ahead of its original expectations.

Metlen Energy & Metals

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.