MYTIL Update Report Sept 2011 Final

8/4/2019 MYTIL Update Report Sept 2011 Final

1/14

EQUITY RESEARCH

UPDATE REPORT

Outperfrom

Key financials 2009 2010 * 2011E 2012E 2013E

Turnover ( m) 661.8 969.0 1,316.1 1,534.1 1,646.1

EBITDA ( m) 118.9 160.3 191.0 230.8 267.3

Net Income (m) 13.7 46.3 66.3 89.3 116.7

reported EPS () 0.13 0.57 0.62 0.84 1.09

Adj. EPS chng (%) -6.0% 205.2% 47.7% 34.7% 30.7%

P/E (x) 39.1 8.1 5.6 4.1 3.2

EV/EBITDA (x) 12.2 6.7 6.3 5.0 4.2

EV/Sales (x) 1.6 1.1 0.9 0.7 0.7

P/BV (x) 0.6 0.5 0.5 0.4 0.4

Dividend Yield (%) 0.0% 0.0% 6.5% 9.3% 12.1%

INDUSTRIALS - ENERGY

27 September 2011

Stock rating:Maintain

Outperform

Current Price:3.16closing price 26/09/11)

New 12M Target price:6.2

Previous 12M Target price:7.7

tock Dataweek low / high 3.15 - 5.81

arket cap in m 369.5uters / Bloomberg MYTr.AT/ MYTIL GAee float (e) 64.0%stitutional ownership (e) 30.9%

xpected return

pside to price target 95.5%ividend yield estimate 6.5%

Trading Data

Absolute 3m -29%->>- 12m -23%

Relative to ATG 3m 14%->>- 12m 47%3m avg. daily trading vol. in m 0.8Weight in ATG 1.55%

Kostas Ntounasndustrials/Energy/Construction

Analyst+30210 [email protected]

Reiterate Outperform rating; add to our Top Picks list

We reiterate our Outperform rating on Mytilineos and revise downwards our target

price to 6.2/share having plugged in a 9% risk free rate (previously 5.5%) applied

across our universe. We add Mytilineos to our Top Picks list as we see significant

upside potential along with the gradually increasing contribution of the Groups

energy sales. We highlight the following:

The Groups diversified asset base combines exposure to metals/mining

(through AoG) with energy (through Metka and Protergia). Consequently, there

is a quite balanced exposure across different sectors and geographies.

Mytilineos possesses a strategic position in the domestic energy market

(1.2GW base load installed capacity; 0.7bn investment cost), being well

placed to grasp opportunities that may arise from the liberalization of the

energy market and/or the States privatisation programme.

Significant exposure abroad (c.80% of Group sales) as both Metka and

Aluminum of Greece have a strong international exposure through physical

presence and metals exports respectively.

Regarding subsidiary Metka, we note its high backlog (2.5x FY11 est. sales),

strong earnings momentum and attractive valuation (P/E 12e: 3.8x), sound

fundamentals and a net cash position that may exceed 100m at yr-end 11.

Depressed valuation: The stock currently trades at record lows in terms of all

valuation metrics. Our SOTP-derived TP implies a 12M forward: (a)

EV/EBITDA of 6.5x, in line with the stock's 5-yr historical average of 6.6x, (b)

P/E of 7.4x, which is 40% below its 5-yr average. We highlight that the market

value of Mytilineos stake in Metka combined with AoGs share capital of

215m add up to a value of 366m, which equals Mytilineos current MCap.

Diversified base of energy and mining assets; valuationat depressed levels

Source:Mytilineos, National Securities, (*) FY10 Sales, EBITDA, Net profits are adjusted for the one-off gain from the sale of ETADE.

Please refer to important disclaimer on last page

Mytilineos


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A T I O N A L S E C U R I T I E S

27 September 2011

Page 2 Please refer to important disclaimer on last page

Investment Thesis (12M target price: 6.2)

We reiterate our Outperform rating on Mytilineos Holdings. he Group is benefiting from: (a) incremental contributions of its power

plants as of H211. We note that Mytilineos will be the largest IPP (Independent Power Producer) in Greece by year-end 2011,having a 1.2GW portfolio of operational thermal capacity, (b) Metkas impressive backlog accumulation and strong earnings

momentum and (c) favourable pricing environment and lean cost structure in aluminum production.

Our 12-month TP of 6.2 is predicated on our DCF-based sum-of-the-parts valuation. Our TP reflects an: (a) EV/EBITDA2012

multiple of 6.5x, which is in line the stocks 5-yr average of 6.6x, (b) P/E2012 of 7.4x, which is 40% below its historical mean of 12.3x.

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Share performance

Mytilineos Holdings S.A.

Greece ATHEX Compo site

Company Description

Mytilineos Holdings is a leading industrial group of companies active in the Metallurgy & Mining, Energy and EPC sectors. Mytilineos, through

Aluminium of Greece and Sometra, is the largest base metals producer in South Eastern Europe. Metka, the leading EPC contractor in SEE-Middle East, is active in the execution of large-scale industrial and energy projects. Mytilineos Holdings stock is included in the followingindices: Athex General Index, FTSE/Athex 20, FTSE International, MSCI Small Cap and HSBC Small Cap.

Company Snapshot

METALLURGY &

MINING

ALUMINA &

ALUMINIUM

ENERGY

POWER GENERATION

ASSETS

NATURAL

GAS SUPPLY

EPC

METKA

57.4%

'07 '08 '09 '10 '11

3

4

5

6

7

8

9

10

11

12

Next 12 m onths Mean EV/EBITDA for Mytilineos

Mytilineos Holdings S.A.

EU

33%

Greece

20%

Turkey

35%

Other

12%

Sales Breakdown (H1'11)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2008 2009 2010 2011e 2012e 2013e

Sales Breakdown

Energy

Metka

Metallurgy

Total Sales

-50

0

50

100

150

200

250

300

2008 2009 2010 2011e 2012e 2013e

EBITDA Breakdown

Energy

Metka

Metallurgy

Total EBITDA


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27 September 2011


Group Sales & EBITDAbreakdown

Changes in Estimates

Below we present our 2011-2013 gross Sales and EBITDA projections (i.e. excluding intragroup

eliminations) for Mytilineos Group. As illustrated in both graphs, the anticipated growth in top l ine and

operating profits will be mainly due to the commercial operation of the Groups power plants. We also

note that FY10 consolidated figures are positively impacted by the sale of Metkas subsidiary

ETADE to Terna for 42.5m. The corresponding P&L impact, at a Group level, on both sales and

EBITDA is 32.4m and 14.6m at bottom line level.

Source: National Securities

We highlight the following:

(a) In the graph below we present our gross EBITDA projections in order to demonstrate trends

anticipated in the operating performance of each business division on a stand-alone basis,

(b) In our P&L estimates (page 12), we present both the EBITDA figure according to the IFRS

accounting standards (subtracts the Groups operating profits generated by Metkas intragroup

activities, i.e. the construction of Mytilineos power plants) and the EBITDA number reported by the

company. Worth mentioning that the aforementioned figures will almost coincide as o f FY12.


Changes in P&L Estimates

New Old % chng2011e Sales 1,316.1 1,384.1 -5%

EBITDA 191.0 221.4 -14%Net Income 66.3 93.3 -29%

2012e Sales 1,534.1 1,656.9 -7%EBITDA 230.8 286.2 -19%

Net Income 89.3 136.0 -34%Target Price 6.2 7.7 -20%


0

200

400

600

800

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1,200

1,400

1,600

1,800

2008 2009 2010 2011e 2012e 2013e

Group Sales

Energy

Metallurgy

Metka

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100

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300

2008 2009 2010 2011e 2012e 2013e

Group EBITDA

Energy

Metallurgy

Metka


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27 September 2011


Nat Sec estimateson Aluminium of Greece

Changes in Estimates

Key Risks

SalesWe anticipate full capacity utilization in aluminum (i.e. 165KMT annual smelting output; production

is expected to grow by 20% in 2011) from FY11 onwards. With regards to the aluminum average

selling price (including product premium), we expect an average price of $2,920/MT in 2011, slightly

lower y-o-y, given that this years aluminum production has been fully hedged at $2,550/MT through

LME futures contracts with product premiums reaching record high levels (c.$370/MT).

For FY12, we anticipate an average selling price of $2,730/MT assuming an LME price of

$2,370/MT and product premium of $360/MT. We note that aluminum sales amount to c.74% of

AoGs metal revenues.

With regards to alumina sales, we assume 770-800KMT in annual production in FY11-FY13. We

also incorporate a selling price equal to 13.5% of the LME aluminum price, which refers to the

contract with Glencore, and market prices for the remaining volumes sold in the spot market.

We remind that on July 30th

2008, Mytilineos signed a 10-year contract with Glencore for the sale of

5mil MT alumina (at least 350KMT/annum). The contract is effective as of Jan 2010 and provides:

(a) visibility for 10 years, securing the sale of AoGs excess alumina production, and (b) a rather

stable pricing environment coupled with relatively flexible contract terms.

Aluminum Sales 2008 2009 2010 2011e 2012e 2013e

Total Production (MT) 158,179 134,700 136,200 163,000 165,000 165,000Hedged (MT) 0 134,700 70,000 163,000 0 0as % of total 0% 100% 51% 100% 0% 0%Selling price hedged ($/MT) 0 3,207 3,530 2,920 0 0Sales from hedging ( m) 0.0 311.9 185.8 347.4 0.0 0.0Not Hedged 158,179 0 66,200 0 165,000 165,000Spot selling price ($/MT) 3,241 1,984 2,502 2,920 2,730 2,885Spot sales ( m) 345.9 0.0 124.5 0.0 338.7 352.6Aluminium Sales 345.9 311.9 310.3 347.4 338.7 352.6

% total AoG Sales 74% 78% 73% 74% 75% 74%Average effective LME price($/MT) 2,868 2,890 2,699 2,550 2,370 2,535Average selling price ($/MT) 3,241 3,207 3,016 2,920 2,730 2,885AoG total metal sales 467.7 402.4 424.6 469.6 451.3 477.5% chng -1% -14% 2% 11% -4% 6%Source: National Securities

Costs

Our assumptions on AoGs key cost parameters are:

An average electricity tariff of 48-49/MWh in FY11-FY13. As a reminder, Mytilineos has

come to an agreement with PPC regarding the supply of electricity to AoG. The agreement

provides for the supply of electrical power by PPC to AoG for 4,710 hours (i.e. 13 hours a day)

at a price of 40.7/MWh. We also assume c.2.4TWh of annual electricity consumption in 11-13

(vs. 2TWh in FY10) along with a full capacity utilization projected as of 2011.

Annual bauxite production costs are seen in therange of 53-56m going forward.

Annual gas and fuel costsamounting to around 75m.

National Securities Estimates New Old % chng2011e Sales 469.6 423.7 11%

EBITDA 64.4 55.3 16%Net Income 37.5 29.5 27%

Aluminum Price ($/MT) 2,550 2,515 1%Electricity tariff (/MWh) 47.9 42.7 12%Oil price ($/bbl) 105 80 31%EUR/USD 1.37 1.29 6%

2012e Sales 451.3 449.8 0%EBITDA 47.3 64.8 -27%Net Income 27.3 36.8 -26%Aluminum Price ($/MT) 2,370 2,300 3%Electricity tariff (/MWh) 48.4 43.8 10%Oil price ($/bbl) 95 82 16%EUR/USD 1.33 1.29 3%WACC 13.1% 11.9% +120bpsDCF valuation 216.7 334.3 -35%


Lack of aluminum hedging for the FY12 production.

Economic projections on the global growth outlook; growth projections in Europe.

EUR/USD parity. USD strengthening is positive for Mytilineos.

Electricity cost and implementation of the agreement with PPC.


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27 September 2011


Nat Sec estimateson Metka

Valuation parametersWACC raised to 13.7%

Investment PositivesNet cash may exceed

100m at yr end 11, orc.40% of current MCap !

Investment Negatives

Catalysts

We adjust our FY11 sales estimates on Metka to reflect a faster than previously anticipated pace of

execution of its Turkish projects, mainly the Denizli 795MW power unit on behalf of RWE-Turcas.

We also shift the commencement of works for the 2nd

Syrian projects (724MW plant) to August 2012

from early 12 previously. Taking into account the widespread social unrest and the unstable political

environment in Syria, we now incorporate in our model a 9-month delay in the commencement of

site works. As a result, this negatively affects our FY12 sales estimate. We also note that our

projections incorporate backlog additions of just 100m over the next 2 years. For further analysis

on various aspects, please also refer to our previous Metka report issued on April 6th

2011.

Key figures 2011e 2012e 2013eNew Revenues 766.7 626.2 664.6Old Revenues 675.4 779.0 690.2

% variance 13.5% -19.6% -3.7%

New EBITDA 117.7 99.2 105.8Old EBITDA 110.1 125.3 109.7% variance 6.9% -20.9% -3.6%

New EBITDA margin 15.3% 15.8% 15.9%Old EBITDA margin 16.3% 16.1% 15.9%

New Net Income 79.1 71.5 80.4

Old Net Income 73.5 86.0 73.9% variance 7.5% -16.9% 8.8%

New Target Price 13.0Old Target Price 14.7

% variance -11.4%Source: National Securities

Our cost of equity stands at 14.5% (vs. 10.0% before), which breaks down into a risk free rate of

9.0% (vs. 5.5% previously) and a risk premium of 5.5%. Our beta estimate is 0.80 (higher compared

to Bloomberg data) that leads to a WACC of 13.7% (vs. 10.1% previously). We also lower our long

term rate of EBIT growth from 1.0% to 0.5% thereby taking a quite conservative stance in the long

run.

Our target price reflects:

P/E of 9.5x our FY12 projected EPS, which implies a 8% premium vs. its 5-yr historical forward

average multiple of 8.8x.

EV/EBITDA of 6.0x our FY12 pro jected EBITDA, which implies a 9% premium vs. its 5-yr

historical average of 5.4x.

We are positive on Metka due to the following:

Backlog, all signed contracts, amounts to c.1.9bn (2.8x FY11e sales) with c.90% being

outside of Greece.

Net cash position of 40m as of June 30th

2011. We point out that the reported net cash

accounts for 13% of Metkas current MCap. In H211, we anticipate a significant increase in

Metkas net cash, which may exceed 100m at yr-end 11(or c.38% of Metkas MCap), due to

cash collection from clients. We also project a dividend yield exceeding 8% on a recurring basis;

excluding any potential capital return over the next years. High operating margins and economic returns; very low capex needs.

Depressed valuation at current levels as the stock trades at record lows in terms of both

historical P/E (3.8x our FY12 est.) and EV/EBITDA (0.8x our FY12 est.).

Uncertainty regarding the funding of the 2nd

project in Syria. Social unrest and political crisis

may lead to significant delays in the commencement of construction works.

Potential margin erosion medium to longer term.

Volatility in accounts receivables puts pressure on working capital needs on a quarterly basis. Smooth implementation of existing foreign projects and potential win of new international

contracts.

Letter of credit for the 2nd

project in Syria (700MW CCGT plant).

A potential capital return in 2012. Such scenario is not included in our estimates.


6/14


27 September 2011


Energy Market

Mytilineos will be the

largest IPP by yr-end 2011

MYTIL Group is expected

to reach c.11% market

share in electricity

generation in FY12

M&M Gas to become the

largest private gas supplier

in Greece

Based on available data and our projections on the domestic energy market, we note the following:

Mytilineos total installed capacity of 1,257MW is estimated to account for c.7.5% of the

projected total domestic capacity at year end 2011. Mytilineos will be the largest Independent

Power Producer (IPP) in the Greek market by the end of the year.

In terms of base load installed capacity in the interconnected system (i.e. the mainland andsome of the islands), Mytilineos 3 gas-fired plants represent c.9% of the total capacity,

according to our estimates.


Some other qualitative and quantitative characteristics of the Groups energy portfolio are:

All thermal plants are located in the countrys Southern System, therefore close to customers

consuming the bulk of the domestic electricity supply (mostly based in Athens).

In terms of merit order, Mytilineos CCGT plants appear to be the most competitive (i.e. with the

lowest marginal costs) across all gas-fired plants in the system. Therefore, Mytilineos power

plants seem to be the first ones to enter the system after the operation of RES, hydros and

PPCs lignite plants.

According to our current estimates, Mytilineos is expected to produce c. 6,300GWh of electricity

in FY12. Consequently, the Groups market share in energy generation is projected to reach

11% next year.


M&M Natural Gas (50-50 JV of Mytilineos and Motor Oil) has a: (a) 20-year license to sell

natural gas, (b) captive client base of c. 1.6bcm annual gas consumption in a total market that is

expected to reach c. 4.5bcm in FY12. Therefore, M&M can become the largest private and the

second gas supplier (following the incumbent DEPA) in the domestic market.

In our view, Mytilineos Group is well positioned to benefit from the liberalization of the domesticenergy market, as it enjoys an early entrance advantage. M&Ms LNG imports provide a

competitive advantage, compared to other market participants, as they lead to reduced variable

costs, vs. the pipeline prices offered by DEPA.

PPC

81%

Mytilineos

9%

Others

10%

Base load capacity in the mainland (yr-end '11)

PPC

73%Mytilineos

11%

Others

16%

Market share in domestic production (FY'12 est.)


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27 September 2011


MYTIL Energy Portfolio

1.2GW installed capacity;

0.7bn investment cost

Key assumptions

EBITDA estimate

Energy to account for

c.39% of Group EBITDA

in FY12

Mytilineos Thermal Energy Portfolio at a glance

Thermal PlantsCapacity

(MW)InvestmentCost ( m)

Ownership Status

CHP - Agios Nicolaos 334 180 100% OperationalCCGT - Agios Nicolaos (Protergia) 444 238 100% OperationalCCGT - Ag. Theodoroi (Korinthos Power) 437 285 65% Operational in Q411

Total 1,215 703Source: Mytilineos Holdings

Mytilineos will be the largest Independent Power Producer (IPP) in Greece by year end 2011, having

1,215MW of base load installed capacity. This accounts for around 10% and 60% of PPCs total and

gas-fired installed capacity respectively. We note that total capex for the construction of the above

mentioned energy portfolio amounted to 0.7bn.

CHP plant: A quite valuable asset; to become fully operational in Q411The CHP plant is expected to commence full commercial operation by the end of the year. Below we

illustrate our preliminary/provisional estimates on CHPs operating performance. We point out that

these estimates may significantly differ from the actual figures being subject to the new electricity

codes, which will determine to a large extent the selling price and the plants merit order, as well as

the markets operating framework.

Second power plant commenced operations as of early June 11

The groups second power plant in Agios Nicolaos, owned by subsidiary Protergia, commenced

commercial operations n June 3rd

, 2011.

Construction of the third power plant is about to finishThe construction of a third power plant in Agious Theodorous is about to be completed and

commercial operation is expected to commence by year end. Plant ownership is under a JV named

Korinthos Power where Mytilineos holds a 65% stake with the remainder owned by Motor Oil.

We incorporate in our estimates the following key data and assumptions:

Operation at a constant cost-plus mode of: (a) 250MW for each of the Protergia and Korinthos

Power plants, (b) 130MW for the CHP plant.

12-hour daily operation of 150MW for each of Protergia and Korinthos Power over a 4-month

summer period.

Average spark spread: 6.5-6.8/MWh

Capacity payment: 45,000/MW.

SMP in the range of68-70/MWh over the period FY11-FY13.

Based on the above mentioned assumptions, we illustrate the following projections on the EBITDA

generated by the Groups thermal plants.

FY'12 est. EBITDA ( m) Protergia Korinthos Power CHP Total

Cost plus 14.7 14.7 7.6 37.0

Additional operation 2.4 2.4 1.3 6.0

Capacity payment 16.9 16.5 12.6 46.0

Total EBITDA 33.9 33.6 21.5 89.0Source: National Securities

In our view, Mytilineos is forming a quite balanced business portfolio, which combines exposure to

energy, EPC projects and metals/metallurgy. The Group will be having a diversified asset base in

terms of geographical exposure (EU, Greece, Turkey and other; please also refer to the graph on

page 2) and business sectors (cyclical and non-cyclical operations).


43%

18%

39%

Group EBITDA breakdown (FY'12 est.)

Metka

Metallurgy

Energy


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27 September 2011


Sensitivity analysis According to our estimates, key sensitivity highlights are: LME aluminum price: Around +/- 8-8.5m annual impact on EBITDA for every $50/tn

increase/drop in the LME price.

Oil price: -/+ 3.5m annual impact on EBITDA for every $50/tn increase/drop in the oil price.

FX: Around -/+ 9.0m annual impact on EBITDA for every 0.05 increase/drop in the EUR/USD

rate.

SOTP Valuation

What does the marketseem to price?


We point out that if we exclude the value of the Group s energy assets, then the current market

value of Mytilineos stake in Metka combined with AoGs share capital of 215m (which is in line with

our DCF-derived NAV for AoG, while AoGs BV stood at 474.9m at yr-end 10) add up to a value of

366m, which equals Mytilineos current MCap.

It is also worth mentioning that: (a) our target MCap equals the investment cost of the Groups power

plants, (b) our fair value for AoG equals the companys share capital, or 0.5x BV.

Sum of Parts % stake Equity Value Value for % of Mytilineos NAV / share

(m) Mytilineos (m) Holdings value ()

AoG 100% 217 217 30% 1.9

Metka 56% 677 380 53% 3.3

Mgmt fee-Parent net debt 11e 100% -404 -404 -56% -3.5

Energy portfolio n.a. 512 512 71% 4.4

Sometra 100% 17 17 2% 0.1

Equity Value 723

Value per share 6.18

Current stock price 3.16

Expected return 96%

12M Forward P/E:Trading at a record low

level; well below the5-yr Mean-1 St. Deviation

Source: Factset

According to the graph, Mytilineos trades at record low levels (currently at 4.4x), 64% below its 5-yr

historical average and 37% below the stocksHistorical Mean minus 1 St. Deviation level.

-5.0

-3.0

-1.0

1.0

3.0

5.0

AoG Metka Mgmt Fee - Parent

Net Debt

Energy assets

Mytilineos: NAV breakdown (in EUR/share)

0

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30

Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

Next 12 months P/E for Mytilineos

5-yr Average

Mean + 1 St.Dev

Mean - 1 St.Dev


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27 September 2011


MYTIL 12M Forward

EV/EBITDA:Trading at record lows;

Well below the 5-yr minus 1St. Deviation

Source: Factset

According to the graph, Mytilineos trades at record low levels (currently at 4.2x), 37% below its

5-yr historical average and 19% below the Historical Mean minus 1 St. Deviation level.

Price / NAV:A pure historical approach

points to a 54% upsidepotential

We also present a historical approach of the Price/NAV ratio over the period we have been

covering Mytilineos Holdings. We use the following time series: (a) Mytilineos historical stock

price, (b) National Securities historical 12M Target Prices (NAV), discounted at a 9% average

historical WACC.

Over the past 5.5 years, Mytilineos stock trades at an average discount of 21% compared to our

discounted Target NAV. Using the historical discount along with our new TP, we come up withan implied TP of 4.9/share, which implies a 54% upside potential from current levels.

If we also take into account the continuous strengthening of the Groups fundamentals and

market position over the last few years, we believe there is upside risk to the above mentioned

historical P/NAV based upside potential.

Source: Bloomberg, National Securities

3

4

5

6

7

8

9

10

11

Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

Next 12 months EV/EBITDA for Mytilineos

5-yr Average

Mean + 1 St.Dev

Mean - 1 St.Dev

20%

40%

60%

80%

100%

120%

140%

160%

Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11

MYTIL: Price/NAV (2006-2011)

Price/NAV

Average


10/14


27 September 2011


Leverage:Current data

Comments

View & ProjectionsManageable debt ratios;

Net debt to enter a downward

path going forward

Overview of Mytilineos debt structure and key metrics

As of 30/06/2011, short-term debt amounted to 240m (vs. 179m at yr-end 10) while long-term

debt reached 646m (vs. 562m at yr-end 10). Cash and cash equivalents amounted to

178.8m, vs. 208.6m at yr-end 10. As a result, net debtincreased by 33% y-t-d to707m.

We note that a big portion of the Groups debt refers to 601.5m of bonds (please also refer to

our comment below), which accounts for 93% of Mytilineos long-term debt and 68% of the

Groups total borrowings.

As a reminder, the Groups debt maturity profile over the past 3 years has been the following:

Debt (in m) perduration

< 6months

6-12months

1-5years

> 5years

Total

yr-end 2010 8.6 72.0 614.3 0.0 694.9% of total 1% 11% 94% 0%

yr-end 2009 90.5 37.5 522.0 0.0 650.1% of total 14% 6% 80% 0%

yr-end 2008 27.4 72.6 311.2 0.0 411.2% of total 7% 18% 76% 0%

Source: Mytilineos

In Q308, Mytilineos signed a 5-year credit facility with a syndication of domestic and foreign

banks. The credit line referred to a common bond loan up to the amount of 465m at Euriborplus spread 0.85%. That said, we assume that the initial terms of the above mentioned

syndicated loan have been adjusted in order to reflect tighter funding conditions prevailing in the

Greek banking sector as of 2010. According to our estimates, Mytilineos average cost of debt

should be around 5.7% in FY12, vs. an estimated average cost of c.4% in FY10.

The above mentioned 5-yr bond loan accounts for c.72% of the Groups long-term debt. 10% of

the bond has already been repaid, 20% matures in 2012 (i.e. 93m) and the remaining 70%

matures in August 2013. Therefore, around 37% and 46% of the Groups total debt and net debt

respectively matures in 2 years time.

It is also worth mentioning that the Group owns 3 CCGT plants (1.2GW installed capacity;

c.0.7bn total capex) having c.180m of debt, which is held by Korinthos Power (65% Mytilineos,

35% Motor Oil) that owns the Groups 3

rd

gas-fired power plant. So, these investments havebeen funded, to a large extent, through equity.

Following a peak in net debt in mid 2011, management anticipates a gradual reduction as we

approach the end of the year. In our view, the projected net debt reduction will be primarily due

to lower capex following the completion of all major energy investments in H211, coupled with a

gradual normalization in working capital needs attributed to a deceleration in accounts

receivables.

Based on our projections, we anticipate the following:

Net debt/EBITDA within 2.0x-3.2x

Interest Coverage (EBIT/Interest Expenses) between 4.0x-6.7x

Net debt/Equity below 0.8x

In our view, Mytilineos debt dynamics will be improving going forward, starting as of Q411,mainly due to the increasing cash generation from the operations of the Groups power units

following the completion of all major energy investments by year end 2011.


0.0

2.0

4.0

6.0

8.0

0.0

2.0

4.0

6.0

8.0

10.0

Key leverage ratios

Net debt/EBITDA

Interest Coverage


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Investment Positives

Investment Negatives

Catalysts / Risks

Shareholder Structure

Diversified business portfolio combining exposure to mining/metallurgy operations with

EPC and energy.

Mytilineos will be the largest IPP in terms of thermal plants installed capacity and

electricity production until year end 2011. Moreover, Mytilineos is on track to become a

key player in the domestic gas market. Subsidiary Metkas solid fundamentals and positive outlook. Well positioned to benefit

from an expansion in regional fast-growing markets.

Significant exposure abroad (c.80% of Group sales) as both Metka and Aluminum of

Greece have a strong presence outside of Greece through physical premises and metals

exports respectively.

Quite attractive valuation(P/E 12e: 4.1x, EV/EBITDA: 5.0x, P/BV: 0.4x) coupled with a

decent growth outlook (11-13 EPS CAGR: 33%).

--------------------------------------------------------------------------------------------- The Groups CHP plant experiencing prolonged delays for full scale commercial

operation. That said, full commercial operation is expected to start by year end. The adverse business environment due to the social unrest in Syria is likely to result in

significant delays in the commencement of construction works for the 2nd

Syrian project.

Increased debt levels and working capital needs in the short to medium-term.

Free cash flow is negatively impacted by increased investments in the energy segment

as well as Metkas account receivables.

--------------------------------------------------------------------------------------------- The opening up of the domestic energy market could lead to: (a) new opportunities in

thermal energy (i.e. lignite assets), and/or (b) intensified competition as new players

(mainly European utilities) may enter the Greek market.

Potential new project(s) of subsidiary Metka. The company is participating/targeting 7international tenders for energy projects in Turkey, lately in Iraq and also in Central

Europe. It also participates in the bidding process for two PPC thermal plants (100MW in

Crete and 550-660MW in Ptolemaida budgeted at 135m and 1.32bn respectively).

Opportunities arising from the Governments privatisation programme. In our view, a

company that perfectly fits to Mytilineos Metals & Metallurgy business division is nickel

producer Larco.

Potential further deterioration in the Groups leverage ratios would be an issue.

FX risk. The appreciation of the USD vs. the EUR is positive for Mytilineos.

Government interference: The operation of the domestic energy market has been highly

dependent on government decisions on several issues, such as: (a) the regulatoryframework, (b) tariff increases, and (c) the licensing process and the implementation of

various investments.

Source: Mytilineos

Mr. EvaggelosMytilineos

15.3%

Mr. IoannisMytilineos

16.4%

GreekInstitutionals

13.4%

ForeignInstitutionals

17.5%

Retail33.1%

Treasury stock4.3%

Mytilineos Shareholders


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Mytilineos consolidated accountsin mil 2005 2006 2007 2008 2009 2010 2011e 2012e 2013e

BALANCE SHEET

Net fixed assets 445.5 598.7 396.8 427.8 655.4 1,224.1 1,298.0 1,334.4 1,365.4Goodwill 102.3 128.3 141.4 171.7 201.3 209.4 209.4 209.4 209.4Other non-current assets 85.8 129.7 234.9 302.5 278.7 82.7 89.4 89.4 89.4Current Assets 541.9 509.4 654.0 657.8 753.8 1,045.0 1,131.6 1,313.1 1,481.5

Accounts receivable & other 318.3 283.3 364.1 307.4 386.2 721.0 917.6 1,069.6 1,147.7Inventories 154.3 203.1 180.9 174.0 89.4 111.2 146.2 170.4 182.9Cash 62.7 15.4 84.9 44.4 219.2 208.6 63.6 68.9 145.8Other 6.5 7.7 246.7 342.3 158.7 61.6 39.2 39.2 39.2

TOTAL ASSETS 1,175.4 1,366.2 1,649.7 1,770.2 1,988.8 2,618.6 2,763.4 2,981.3 3,180.7Net debt position 59.1 187.9 267.6 366.8 430.9 532.8 612.9 607.6 529.7Shareholders' equity 389.4 726.9 743.0 848.7 694.4 723.7 790.1 857.5 943.0Minority interest on share capital 318.4 52.3 56.9 52.6 69.5 120.5 151.5 185.0 223.0Long-term liabilities 166.0 185.4 218.6 500.6 680.6 906.2 875.0 875.0 875.0Long term debt 52.1 37.4 56.9 311.2 522.0 562.1 630.0 630.0 630.0

Short-term liabilities 301.6 401.7 571.1 283.7 544.1 864.0 942.7 1,063.8 1,139.7Accounts payable 142.9 103.4 182.8 141.6 354.9 617.2 811.2 945.6 1,014.6Liabilities for tax 48.0 57.9 60.0 19.3 37.4 51.2 50.0 36.7 43.6Bank debt 51.5 156.0 295.6 100.1 128.0 132.8 0.0 0.0 0.0Other S/T liabilities 59.3 84.3 92.9 107.3 24.1 66.9 85.7 81.5 81.5

TOTAL EQUITY & LIABILITIES 1,175.4 1,366.2 1,649.7 1,770.2 1,988.8 2,618.6 2,763.4 2,981.3 3,180.7

RATIO ANALYSISLiquidity: Current ratio 1.80 1.27 1.15 2.32 1.39 1.21 1.20 1.23 1.30

Acid ratio 1.28 0.76 0.83 1.71 1.22 1.08 1.05 1.07 1.14

Financial Structure: Net debt/Equity 0.2 0.3 0.4 0.4 0.6 0.7 0.8 0.7 0.6Net debt/EBITDA 0.4 1.0 1.7 3.8 4.8 3.3 3.2 2.6 2.0

Profitabili ty: Return on total assets 18% 11% 12% 1% 1% 3% 2% 3% 4%Return on Equity 19% 14% 26% 2% 2% 9% 9% 11% 13%Return on Invested Capital 22% 13% 9% 5% 4% 12% 13% 16% 18%

CASH FLOW

Profit after tax before minorities 118.7 156.0 215.2 31.3 20.2 97.8 97.3 122.9 154.7Plus: Depreciation & amortization 20.3 24.8 22.6 21.1 20.3 21.4 23.0 37.1 38.0Plus: Chng in provisions & non-cash items -25.0 -56.6 -174.4 6.1 13.8 2.3 -7.6 0.0 0.0Plus: Net Interest expenses 9.1 8.1 7.8 23.1 17.8 -3.3 33.1 32.5 30.2Plus: Taxes payable -30.0 -22.8 -23.7 -68.4 16.7 -5.5 -33.2 -25.1 -36.7

Gross cash flow 93.1 109.5 47.6 13.2 88.7 112.7 112.7 167.4 186.2Working capital chng -31.5 -64.7 3.4 45.8 -1.0 -30.6 -22.3 -41.8 -21.5

Operating cash flow 61.6 44.8 51.1 59.0 87.7 82.2 90.4 125.6 164.7Less: Purchases of fixed assets 81.6 88.3 14.3 13.5 55.3 157.6 97.0 73.5 69.0

Free cash flow 22.4 -24.3 -153.5 74.2 83.2 43.2 -7.7 52.1 95.7PROFIT & LOSS 2005 2006 2007 2008 2009 2010 * 2011e 2012e 2013e

Sales 746.6 837.0 912.6 929.1 661.8 1,001.4 1,316.1 1,534.1 1,646.1

% chng 140% 12% 9% 2% -29% 51% 31% 17% 7%COGS & SG&A 588.2 649.8 758.9 832.8 572.5 830.2 1,137.6 1,304.9 1,379.6EBITDA (IFRS) 158.4 187.2 153.7 96.3 89.3 171.2 178.5 229.2 266.5% chng 275% 18% -18% -37% -7% 92% 4% 28% 16%Reported EBITDA 158.4 187.2 153.7 109.5 118.9 192.7 191.0 230.8 267.3% chng 275% 18.2% -17.9% -28.8% 8.6% 62% -1% 21% 16%EBITDA margin 21.2% 22.4% 16.8% 11.8% 18.0% 19.2% 14.5% 15.0% 16.2%Depreciation / Amortization 20.3 24.4 22.6 20.9 19.5 20.3 23.0 37.1 38.0Operating profit (EBIT) 138.1 162.8 131.1 75.4 69.8 150.9 155.5 192.1 228.5% chng 292% 18% -19% -42% -7% 116% 3% 24% 19%EBIT margin 18.5% 19.4% 14.4% 8.1% 10.5% 15.1% 11.8% 12.5% 13.9%Financial Results & other (gain/loss) 156.6 40.5 143.3 -31.1 -33.3 -19.9 -33.1 -32.5 -30.2Pre-tax profit 294.7 203.3 274.4 44.3 36.5 131.0 122.4 159.6 198.3% chng 906% -31% 35% -84% -18% 259% -7% 30% 24%Income tax 38.5 47.4 59.2 15.5 16.7 33.2 25.1 36.7 43.6% effective tax rate 25% 23% 22% 35% 46% 25% 21% 23% 22%Minority stake in profits 44.7 5.0 17.1 12.9 6.4 29.8 31.0 33.6 37.9Net Income 211.5 152.4 193.6 18.5 13.7 60.9 66.3 89.3 116.7

Adj. Net Income 74.1 103.5 41.5 16.1 14.7 45.0 66.3 89.3 116.7% chng 515% 40% -60% -61% -8% 205% 47% 35% 31%Net profit margin 28% 18% 21% 2% 2% 6% 5% 6% 7%EPS 1.81 1.57 1.71 0.17 0.13 0.57 0.62 0.84 1.09Adj. EPS chng 515% 68% -66% -60% -6% 205% 48% 35% 31%Dividends 46.8 58.3 57.7 11.0 0.0 0.0 21.9 31.3 40.9Dividend policy: Payout Ratio 63% 38% 30% 59% 0% 0% 33% 35% 35%DPS 0.40 0.60 0.51 0.10 0.00 0.00 0.21 0.29 0.38% chng 477% 50% 132% -80% -100% n.a. n.a. 43% 31%Retained profit and reserves 203.4 105.6 135.3 -39.2 2.8 60.9 66.3 67.4 85.5BVPS 3.33 6.22 6.36 7.25 5.94 6.2 6.8 7.3 8.1Market Cap 888.4 1,461.2 1,678.7 463.3 587.3 492.5 369.5 369.5 369.5Weighted average number of shares 116,898,053 97,211,748 113,084,743 109,591,000 106,863,000 106,863,000 106,681,000 106,681,000 106,681,000End-year number of common shares 116,898,053 116,898,053 116,898,053 116,984,338 116,984,338 116,984,338 116,915,862 116,915,862 116,915,862End-year/current stock price 7.60 12.50 14.36 3.96 5.02 4.21 3.16 3.16 3.16% chng of stock price 170% 64% 15% -72% 27% -16% -25% 0% 0%General Index 3,664 4,394 5,179 1,787 2,196 1,414 785 785 785GI Performance 32% 20% 18% -66% 23% -36% -45% 0% 0%Out/under performance 105% 37% -3% -20% 3% 30% 35% 0% 0%

Source: Mytilineos, National Securities (*) FY10 P&L was positively impacted (32.4m atboth Sales and EBITDA leveland 14.6m at bottom line) by the one-off gain from the sale of ETADE by Metka.


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Disclosure Appendix

This document has been produced and issued by National Securities S.A., which is regulated by the Hellenic Capital Market Commission, and distributed in the United Kingdom byNational Securities S.A. - London branch, which is authorised and regulated by the Financial Services Authority.

National Securities SA is not engaged in any agreement with the subject companies for the preparation of this report. The present report has solely informative use. The commentscontented herein do not constitute buy, hold or sell suggestions under any circumstances. National Securities S.A. may do and may seek to do business with companies covered in its

research reports. Therefore, investors should be aware that there might be a conflict of interest that could influence the impartiality of this report. Investors should consider this report asonly one of the factors influencing their investment decision. Securities contented in this report are subject to investment risks, including the loss of the initial capital invested. This reportis addressed to professional investors only and no part of this report may be reproduced or passed on in any manner without prior permission. We verify that this report has beenprepared according to our regulations and guidelines concerning conflict management. According to National Securities S.A. regulations, the Equity Analysis Department is restricted tocommunicate and publish only the necessary data according to applicable laws. National Securities S.A. conforms to the relative regulations regarding confidential information and marketabuse.

This marketing communication is distributed in the United Kingdom by National Securities S.A. - London branch, which is authorised and regulated by the Financial Services Authority.This document does not constitute or form part of an offer or invitation to subscribe for or purchase or sell or solicitation of any offer to subscribe for or purchase or sell any securitiesreferred to herein and neither this document nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Thisdocument is furnished to you alone and no part of this report may be reproduced or passed on in any manner without the prior written permission of National Securities S.A. Londonbranch. This document is for distribution in the United Kingdom only to persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of theFSMA 2000 (Financial Promotion) Order 2005; or (ii) who are persons falling within article 49(2)(a) to (d) (high net worth companies, unincorporated associations etc) of the FSMA 2000(Financial Promotion) Order 2005; or (iii) to whom it may otherwise lawfully be communicated. This report is directed only at such persons and must not be acted on or relied on by anyother person. Any investment or investment activity to which this report relates is available only to such persons and will be engaged in only with such person.

National Securities S.A. and/or National Securities S.A. - London branch and/or their associated group companies or a person or persons connected with the companies may from time totime act on their own account in transactions in any securities mentioned herein or in any related investment or may act as a market maker or may have acted in some capacity in relationto a public offering of such securities in the past. Additional information regarding this will be furnished upon request.

The information contained in this report including any expression of opinion has been taken from sources believed to be reliable but it cannot be guaranteed and no warranty or

representation is given that such information is accurate or complete and it should not be relied upon as such. All opinions suggestions and estimates for each company contended in thisreport constitute the personal views of the respective author at this date and are subject to change without notice. It is certified that the analysts personal views orspecific suggestionsexpressed in this report were not and will not be in any case linked directly or indirectly with the analysts compensation.

National Securities policy is to update research reports, as it deems appropriate, based on developments with the subject company, the sector or the market that may have a materialimpact on the research view or opinions stated herein.

Disclosure Checklist for Companies mentioned & other price data information

Company Name Reuters Rating Price Price date / time Disclosure

Mytilineos Holdings MYTr.AT Outperform 3.16 26 September 2011 / Official Close 3, 9


1. National Securities and/or its affiliate(s) has acted as manager/co-manager/adviser in the underwriting or placement of securities of this company within the past 12 months.2. National Securities and/or its affiliate(s) has received compensation for investment banking services from this company during the past 12 months.3. National Securities and/or its affiliate(s) makes a market in the securities of this company.4. National Securities and its affiliate(s) own five percent or more of the total share capital of this company.5. The company and its affiliate(s) own five percent or more of the total share capital of National Securities and its affiliates.6. National Securities has sent the research report to the company prior to publication for factual verification.7. Following 6, National Securities has changed the contents of the initially sent research report, with respect to: no change.

8. National Securities has received compensation from the company for the preparation of this research report.9. National Securities has acted as a broker in stock options plans, share buybacks and/or own shares sales of securities of this company within the past 12 months.10. National Securities has acted as an arranger and/or credit facilitator and/or advisor in the issuance of convertible bonds and/or in the provision of credit facility.

Rating and target price latest history (Mytil)

Date Rating Price Target price

8 February 2006 Equalweight 25.10 24.7

13 March 2006 Upgrade to Overweight 20.60 24.9

25 May 2006 Overweight 18.78 25.0

7 August 2006 Overweight 20.00 25.2

27 November 2006 Overweight 24.66 27.1

5 March 2007 Overweight 31.00 35.2

26 April 2007 Overweight 37.50 43.0

7 September 2007 * Overweight 37.34 * 41.0 *

16 April 2008 Overweight 8.34 12.4

22 May 2008 Overweight 8.64 12.2

7 August 2008 Overweight 7.78 11.6

11 November 2008 Overweight 4.92 10.3

24 April 2009 Downgrade to Neutral 4.26 5.3

18 November 2009 Neutral 5.27 6.2

17 September 2010 Upgrade to Outperform 4.46 7.7

Source: National Securities,* Note: All pricesmentioned before that date are prior to the 14:10 stock split.

Risks and sensitivity:

External factors (aluminium price, raw material costs, oil and gas prices, FX rate, SMP) can have a significant impact on our estimates.Operating conditions in the electricity wholesale market.Pending implementation of structural changes in the regulatory framework and the functioning of the domestic energy market. Our target price and estimates are sensitive to various factors including interest rates, inflation, the local economic environment, market volatility, management continuity or other

company specific events.Ratings Distribution (Last quarter)

Outperform Neutral Underperform

Greek Equity Research Coverage (46) 54% 39% 7%

% of companies in each rating category that are investment banking clients 59% 64% 8%


Definition of investment ratingsOutperform, Neutral, Underperform: Denote notional investment ratings (not recommendations) pegged to the performance of the General Index, which imply a positive, neutral and

negative view respectively.Outperform: The stock is expected to perform above the General Index.Neutral: The stock is expected to perform in line with the General Index.Underperform: The stock is expected to perform below the General Index.

Analyst CertificationThe following analyst hereby certify that the views expressed in this research report accurately reflect their personal views about the subject securities and issuers and that no part of theircompensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in the research report: Kostas Ntounas.


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National Securities S.A.

Member of the Athens Stock Exchange Sales: Research:

91 Michalakopoulou Str.115 28 Athens, Greece

George Goufas +30 210 7720147 Theodore Ritsos +30 210 7720176

Ilias Papazachariou +30 210 7720113 Kostas Ntounas +30 210 7720174

Telephone: +30 210 7720000 Merve Kosker +30 210 7720122 Panagiotis Kladis +30 210 7720185

Facsimile: +30 210 7720001 Zois Mpeloumpasis +30 210 7720146 Iakovos Kourtesis +30 210 7720251

E-mail: [email protected] Pantelis Petritsis +30 210 7720562 Victor Labate +30 210 7720076

Nikos Kyriazis +30 210 7720160 Marianna Paloumpi +30 210 7720171

National Securities S.A. London branch

75 King William Str. Sales: Alan Shala +44 207 105 3803

EC4N 7BE, London, UK Bahar Sangar +44 207 105 3804

Telephone: +44 207 105 3801

Facsimile: +44 207 105 3895
mailto:[email protected]:[email protected]

MYTIL Update Report Sept 2011 Final

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