Metlen (MTLN) Strategic Analysis Report on Defense Business Diversification

Based on comprehensive market research and data analysis, I present to you an in-depth analysis report on the strategic significance and valuation impact of Metlen’s business diversification into the defense and railway equipment sectors.

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Metlen Energy & Metals Plc (formerly Mytilineos) is a leading integrated energy and metals conglomerate in Greece, founded in 1908 as a family-owned business[1]. In August 2025, the company successfully completed its primary listing on the London Stock Exchange (ticker: MTLN), while retaining its secondary listing on the Athens Stock Exchange, becoming the first company to list primarily on the LSE denominated in euros[2].

• Revenue
  : €5.682 billion
• Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
  : €1.08 billion
• Current Market Capitalization
  : Approximately €5.75 billion
• Price-to-Earnings Ratio (P/E)
  : 11.83x
• Enterprise Value-to-EBITDA Ratio (EV/EBITDA)
  : 9.32x

Metlen has transformed from a traditional single-business model to a four-pillar business system:

1. Energy Business (Energy)
   : Covers thermal and renewable energy projects, electricity distribution and trading, power grid infrastructure, and energy storage systems
2. Metals Business (Metals)
   : Includes vertically integrated production of bauxite, alumina, and primary aluminum
3. Defense Equipment Business (Defense Equipment)
   : The sixth production unit, focusing on the defense and railway equipment sectors
4. Infrastructure & Concessions Business (Infrastructure & Concessions)
   : Covers infrastructure projects such as transportation, water conservancy, and ports

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The “Metlen Technologies Hub” (Defense Technology Hub) being built by Metlen in Volos, Greece, is the core carrier of its defense business strategy. This project aims to create an interconnected Europe-scale defense hub capable of executing multiple heavy weapons system production and support projects simultaneously[3].

Plant No.	Status	Key Products	Expected Commissioning Time	Investment Scale
Plant 1-2	In Operation	Defense Metallurgical Equipment	Already in Operation	Existing Capacity
Plant 3	Under Construction	Armored Vehicles and Components	Early 2026	Under Construction
Plant 4	FID Approved	Leopard 2A8 Main Battle Tank	H1 2027	Approximately €50 million
Plant 5	In Planning	Railway Equipment and Multi-Project Support	TBD	TBD

• 60 acres of industrial land
• Focuses on the production of armored vehicles, military heavy vehicle parts, and equipment
• Adopts advanced welding and assembly technologies developed by Metlen over 30 years
• Capable of operating five different projects simultaneously

Metlen has built a strong industrial alliance through strategic cooperation with leading international defense enterprises:

1. IVECO Defence Vehicles (IDV)
   • Signed an exclusive Memorandum of Understanding (MoU)
   • Jointly participates in the Greek military vehicle fleet renewal project
   • Co-develops the military equipment market

2. KNDS (European Defense Giant)
   • Strategic partnership
   • Production technical support for the Leopard 2A8 main battle tank
   • Integration into the European defense industry value chain

• Access to cutting-edge defense manufacturing technologies
• Participation in Greece’s €25 billion 12-year rearmament program
• Locked-in local production share
• Enhanced position in the European defense supply chain

Profound changes in the European security landscape are reshaping the defense industry structure:

• NATO Defense Spending Target
  : Member states are required to spend at least 2% of GDP on defense
• Greece’s Unique Position
  : As a key NATO member on the southeastern flank, its defense spending has long been above the European NATO average
• EU Strategic Autonomy
  : Reduce reliance on U.S. defense supplies and promote European local production
• Impact of the Ukraine War
  : Accelerates defense budget expansion across European countries

The Greek government has announced:

• 12-year rearmament program
  : Total amount of €25 billion
• Local Production Policy Commitment
  : Allocate a portion of the budget to local manufacturers
• Critical Raw Materials Act (CRMA)
  : Metlen’s gallium production project has been recognized as an EU strategic project

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According to analyst forecasts, Metlen’s defense equipment division will achieve a leapfrog growth in EBITDA from €15 million in 2024 to €160 million in 2029[4]:

Year	Defense EBITDA (€ million)	Cumulative Capex (€ million)	Remarks
2024A	15	30	Foundation Stage
2025E	30	80	Plant 3 Under Construction
2026E	55	120	Plant 3 Commissioned
2027E	85	150	Plant 4 Under Construction
2028E	120	170	Plant 4 Commissioned
2029E	160	180	Capacity Ramp-Up Completed

• Incremental capacity from the commissioning of Plant 3
• Significant capacity increase after Plant 4 is commissioned in 2027
• Continuous order fulfillment from IVECO and KNDS
• Local procurement share allocation from the Greek Ministry of National Defense

A Sum-of-the-Parts (SOTP) valuation analysis was conducted for Metlen[4]:

Business Segment	Valuation (€ million)	Valuation Method	WACC Assumption
Energy Business	4,562	DCF	8.5%
Metals Business (Including Defense)	3,968	DCF	9.8%
Defense Equipment	681	DCF	9.1%
Infrastructure & Concessions	364	DCF	9.4%
Total Enterprise Value	12,164	-	-
Less: Net Debt	(2,985)	-	-
Less: Minority Interests and Others	(381)	-	-
Equity Value	8,798	-	-
Value Per Share	€61.50	-	-
Current Share Price	€45.54	-	-
Expected Return	+35%	-	-

• Defense EV/EBITDA
  : Approximately 9.1x (based on 2029 target EBITDA of €160 million)
• Company-wide EV/EBITDA
  : 9.32x (current)
• Peer Comparison
  : Average EV/EBITDA of European defense companies is approximately 12-15x
• Valuation Discount Factors
  : The defense business is still in the early growth stage, and large-scale production is yet to be validated

Catalyst	Expected Time	Valuation Impact
Commissioning of Plant 3	Early 2026	+€0.3-0.5 per share
Major Defense Order Fulfillment	2026-2027	+€0.5-1.0 per share
Commissioning of Plant 4	H1 2027	+€0.5-0.8 per share
Greek Local Procurement Agreement	Ongoing	+€0.2-0.4 per share

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The introduction of the defense business has significantly reduced Metlen’s business concentration risk:

• Reduced Reliance on Traditional Businesses
  : The proportion of energy business has dropped from 70% to approximately 50%
• High-Value-Added Product Line
  : The gross profit margin of defense equipment is expected to be higher than that of traditional metal businesses
• Counter-Cyclical Nature
  : Defense spending is relatively rigid and not significantly affected by economic cycles

Indicator	2024 (Pre-Diversification)	2029 (Target)	Change
Group EBITDA	€1.08 billion	€2.0-2.1 billion	+87%
Defense EBITDA as % of Total	0.1%	7.6%	Significant Increase
Net Profit Margin	10.3%	Approximately 13%	Improved
ROE	20.4%	22-25%	Increased

Metlen’s vertical integration advantages extend to the defense sector:

• Raw Material Supply Guarantee
  : Owned bauxite mine in Romania ensures key raw materials
• Processing Technology Reuse
  : Existing metal processing capabilities are directly applied to defense equipment
• Logistics and Port Facilities
  : Private port facilities reduce transportation costs

• Patent Portfolio
  : One patent registered, four patent applications pending approval
• Manufacturing Process Know-How
  : Transformed from 30 years of industrial manufacturing experience
• R&D Investment
  : Continuous technological iteration capability

• Job Creation
  : Plant 4 is expected to create 200-250 new jobs
• Technology Introduction
  : Cutting-edge manufacturing technologies brought in through international cooperation
• Industrial Agglomeration
  : Building a local defense industry ecosystem in Greece

• Defense Autonomy
  : Enhancing Europe’s local production capabilities
• Supply Chain Security
  : Reducing reliance on non-European suppliers
• Geopolitical Status
  : Enhancing Greece’s strategic value in the European security architecture

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Risk Type	Risk Description	Risk Level	Mitigation Measures
Execution Risk	Delays in capacity construction or cost overruns	Medium	Phased investment and phased approval
Order Risk	Defense orders fall short of expectations	Medium	Lock in partial demand through strategic cooperation agreements
Policy Risk	Changes in Greece’s defense budget or local production policies	Low	Supported by EU CRMA project recognition
Technology Risk	Patent protection and technology leakage	Low	Patent portfolio and intellectual property protection
Market Risk	Slowdown in European defense spending growth	Low	Profound changes in the security environment after the Ukraine War

✓ Defense business EBITDA CAGR exceeds 80% (2024-2029)
✓ Strategic cooperation with leading international defense enterprises provides order guarantees
✓ Greece’s €25 billion 12-year rearmament program provides long-term demand
✓ Analyst target price represents a 35% upside from the current share price
✓ Expanded international investor base and improved liquidity after London listing

⚠ The defense business contributed only 1.4% of group EBITDA in 2024; scaling up will take time
⚠ Plant 4 is not expected to be commissioned until 2027; short-term incremental capacity is limited
⚠ Valuation already partially reflects growth expectations; continuous tracking of order fulfillment is required

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1. High Probability of Successful Strategic Transformation
   : Metlen’s defense business expansion is built on a solid foundation of existing manufacturing capabilities, international partnerships, and regional policy support.
2. Sufficient Valuation Support
   : The €681 million valuation of the defense equipment segment (WACC 9.1%) reflects market recognition of the business’s long-term growth potential.
3. Significant Diversification Value
   : Business structure optimization reduces cyclical volatility risk and enhances the company’s overall risk resistance and valuation stability.
4. Clear Catalysts
   : The commissioning of Plant 3 in 2026, Plant 4 in 2027, and potential major defense orders will be key nodes for valuation re-rating.

• Current Valuation Level
  : P/E ratio of 11.83x, EV/EBITDA ratio of 9.32x, which is lower than that of comparable European industrial and energy companies
• Reasonable Valuation Range
  : Based on SOTP analysis, the analyst’s target price of €61.50 corresponds to approximately 8x the 2029 forecast EBITDA, representing a reasonable valuation
• Upside Potential
  : If defense business orders exceed expectations or capacity ramp-up proceeds smoothly, a re-rating to 12-13x EV/EBITDA cannot be ruled out

• The defense business provides Metlen with a differentiated growth engine
• Business diversification reduces the negative impact of traditional energy and metal cycles
• Improved liquidity and international recognition after the London listing
• Current valuation provides a sufficient margin of safety

This report is based on public information and analyst forecasts. Actual performance may deviate from forecasts due to factors such as macroeconomic environment, industry policies, and company execution capabilities.

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[1] METLEN Energy & Metals. (2025). Semi-Annual Financial Report 2025. Investegate. https://www.investegate.co.uk/announcement/rns/metlen-energy-metals-plc--mtln/semi-annual-financial-report-2025/9095015

[2] PR Newswire. (2025, August 4). METLEN begins trading on the London Stock Exchange. https://www.prnewswire.com/news-releases/metlen-begins-trading-on-the-london-stock-exchange-302520563.html

[3] METLEN Group. (2025). Final Investment Decision (FID) Approved for the 4th High-Tech Defence Equipment Plant at the METLEN Technologies Hub in Volos. https://www.metlengroup.com/news/press-releases/final-investment-decision-fid-approved-for-the-4th-high-tech-defence-equipment-plant-at-the-metlen-technologies-hub-in-volos/

[4] Piraeus Securities. (2025, July 2). METLEN Update Report - Greek Equity Research. https://img.cnngreece.gr/attachments/2025/07/02/metlen_update-report_2july2025.pdf

[5] Investing.com. (2026). Metlen Energy & Metals Stock Price Today. https://www.investing.com/equities/metlen-energy-metals

[6] London Stock Exchange. (2026). METLEN ENERGY & METALS PLC. https://www.londonstockexchange.com/stock/MTLN/metlen-energy-metals-plc/company-page