Sphene Capital Sets €49.40 Target on Mutares as Operational Recovery Offsets Holding Shortfall

Mutares posts Q1 operational profit, but holding-level loss and covenant breach trigger a €25M bond buyback. Analyst sees 90% upside despite stock drop.

Munich-based turnaround investor Mutares is navigating a delicate balancing act. Its first-quarter operating performance swung decisively into positive territory, yet investors remained fixated on a holding-level loss and a covenant breach that forced the company to launch a €25 million bond repurchase programme.

The Q1 numbers tell a story of operational progress. Group revenue climbed 10% year-on-year to €1.68 billion, powered by the Automotive and Infrastructure segments. Far more striking, adjusted EBITDA flipped from a €30 million loss a year earlier to a profit of €11.1 million. Four of the group's five divisions are now running in the black.

Yet at the parent-company level, the picture was less rosy. The holding posted a net loss of roughly €1 million for the quarter. That compares with the prior-year period when the sale of Steyr Motors had delivered a tidy gain. In the first three months of 2026, no such exits materialised.

Bond Buyback Follows Covenant Breach

The muted result at holding level comes against the backdrop of a technical default. Mutares breached a financial covenant — the ratio of net debt to equity — owing to valuation effects and a rise in lease liabilities. Bondholders swiftly granted a waiver, sidestepping an immediate acceleration of the debt. But the company has now moved to shore up its balance sheet.

In mid-May, Mutares launched a voluntary tender offer for part of its variable-rate notes due March 2027. The bond has a total face value of €250 million. Mutares is offering to repurchase up to €25 million — 10% of the outstanding amount — at 101% of par plus accrued interest.

That is just the opening salvo. Management aims to slash total bond liabilities from the current €385 million to between €250 million and €300 million by the end of 2026. Starting in the second quarter of that year, the company plans quarterly buybacks of at least €25 million.

The cash will come from portfolio divestments. Mutares has already sold six businesses in 2026, including Kalzip and the inTime Group. In May, it offloaded Polish bus operator Relobus, a deal the analyst team at Sphene Capital views as a validation of the buy-fix-sell model. Further exits are in the pipeline: Magirus is being readied for an IPO or a trade sale, and Dutch engineering group NEM Energy is also on the block.

Analyst Sees Deep Value

The stock, however, has yet to reflect the operational turnaround. Shares changed hands around €26.30, down roughly 12% since the start of the year and a full 28% below the 52-week high of €36.75.

Sphene Capital analyst Peter Thilo Hasler argues the market is grossly underpricing the holding company's portfolio. He has nudged his price target up to €49.40, implying upside of nearly 90%. His sum-of-the-parts model aggregates the estimated fair value of each portfolio company individually.

To hit that target, Mutares needs to execute on the promised exit campaign and, just as importantly, demonstrate that its debt-reduction plan is credible. The board expects the breached covenant to be healed by the end of June 2026, helped by the contributions from recently signed acquisitions — Wärtsilä Gas Solutions and the ethylene technology and processing business it is buying from SABIC.

Record Acquisition in Sight

That SABIC deal is the largest in Mutares' history, bringing with it roughly €2 billion in annual revenues. Its closing, expected in the second half, will underpin the group's growth trajectory.

For the full year, management guides for group sales between €7.9 billion and €9.1 billion and a holding net profit of €165 million to €200 million. Beyond that, Mutares targets compound annual growth of at least 25% in both group revenue and holding profit through 2030.

In parallel, the company is pushing deeper into the United States. Alongside its existing Chicago office, a second US location is being planned. The current acquisition pipeline in North America comprises targets with aggregate revenues of roughly €4.8 billion.

Shareholders are being offered a dividend of €2.00 per share for the 2025 financial year, with the promise of an additional performance payout if exits go well. For now, the market seems to be waiting for clear proof that the deleveraging trajectory holds before it re-rates the stock.