Her Eleftherias Kourtali
Citigroup remains a “bull” for the share of Mytilineos, giving its estimates for the results of 2021 and the prospects of 2022, and thus maintains the recommendation “buy” with a target price of 21.5 euros, seeing a significant rise in ATHEX board of 37.3%, while it places the estimated dividend yield at 2.9%.
According to the American bank, in terms of the results for the year 2021, it expects that Mytilineos will record EBITDA at € 355 million, increased by 11% annually from € 319 million in 2020. The strongest profitability in aluminum companies is the key lever for increased EBITDA, as he points out. The electricity sector is likely to record strong successive earnings in the fourth quarter of 2021, as higher spot prices prove to be a net profit for the company, in contrast to market concerns that the sector will be a “weight” for the listed. Citi estimates for € 109 million EBITDA fourth quarter are 24% higher on a quarterly basis, with most of the increase coming from the electricity sector (+ 55% on a quarterly basis). Citi expects Mytilineos’s net debt to reach € 841 million (compared to € 536 million in 2020) mainly due to the company’s guidance on capital expenditures of € 500 million per year. The increase of new possibilities in the field of electricity, the stronger aluminum prices and the high energy prices are a key catalyst so that the EBITDA of 2022 will move over 500 million euros, as Citi notes and therefore maintains the buy recommendation for the share of the company.
In more detail, as the American bank emphasizes, Mytilineos will benefit from high energy / gas prices. Natural gas, which is a key element in Mytilineos’ electricity generation, is considered one of the “weights” for its market profits. However, Citi reiterates its view that the positive movements in the Greek spreads between the wholesale price of electricity and the cost of its production using natural gas (spark) and the recovery in electricity production, will be reflected in the EBITDA of the fourth quarter. of 2021 in the field. Distribution activities probably remained unprofitable in the fourth quarter, he adds. Although Citi recognizes the cost challenges of the alumina sector from the higher gas prices, the stronger premiums of the natural aluminum market and the locked prices will offset the costs with the above.
In addition, the cash position of Mytilineos, is “comfortable”, according to Citi, despite the higher net debt. He expects that the net debt at the end of 2021 will have reached 841 million euros, from 536 million euros last year. Free cash flow at -247 million euros per year should be considered a good result, given the forward capital expenditure of the renewable energy development program. Citi expects Mytilineos to have similar guidance on capital spending in 2022, but points out that the company has enough potential in its renewable resource portfolio to reduce debt organically. The net debt to EBITDA in 2021 is expected to reach 2.4x and is a comfortable position for the company and is expected to fall below 2x this year.
Finally, as Citi points out, t2022 is a milestone year for the main pillars of Mytilineos investment story, with “green growth” being the key factor for the buy attitude it maintains for its share, which is expected to be strong in 2022. Aluminum recycling production volumes will continue to increase, while the capacity of renewable energy sources will increase in the second half of 2022. Citi’s baseline scenario for EBITDA at 487 million euros for 2022 is based on the normalization of electricity margins and premiums in the physical market, with margins to rise from current levels.