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Investment Thesis of MO-BRUK SA (MBR)



In the following investment thesis I will analyse the Polish company Mo-BRUK, which is engaged in waste management through three business lines (incineration, solidification and RDF alternative energy generation). In the particular case of this company, there are some very important tailwinds in the sector since the European Union established targets in relation to municipal waste management and Poland is far behind, due to this, measures have been implemented that have caused the company to increase its EBITDA margins explosively in the last four years.

In addition, a special situation has arisen in 2020, where the company's float has increased from 1.45% to the current 50%, providing greater optionality for the company to be included in indices and for institutional investors to invest. The investment thesis will value the company by DFC and comparable multiples, establishing two valuation scenarios for each one of them.


1.1. History  


Mo-BRUK was founded in 1985 and is based in Korzenna, Poland and is active in the storage, disposal and recycling of industrial, medical and municipal waste in Poland, Germany, Italy, Denmark and Lithuania. It provides incineration, solidification and stabilisation of waste.

The company also offers construction services, including the construction of concrete pavement, roads and squares. In addition, it owns and operates fuel stations providing liquid fuel sales, car washing and car diagnostic services; produces alternative fuel from municipal and industrial waste; and provides laboratory services. 

Among the most important milestones are the following:

Year 2010: 

Date of first listing on the NewConnect alternative trading system on the NewConnect market 358,018 rights to the company's Series C ordinary bearer shares.

Year 2014:

Completion of the construction and commissioning of a hazardous waste incineration plant in Karsy. The facility in question is one of the elements of the investment project entitled: "Expansion of the Alternative Fuels Production Plant in Karsy". 

Grant by the Patent Office of the Republic of Poland of a patent for an invention entitled "Method of manufacturing synthetic aggregates". Based on a patented technology, the company produces cement granulate from industrial waste at two of its plants: Zakład Odzysku Odpadów in Niecwia (since 1997) and Zakład Odzysku Odpadów Nieorganicznych in Skarbimierz, which was put into operation in the second half of 2014.

Year 2019:

Invitation to submit offers to sell shares addressed to all shareholders. On 19 July 2019, the company purchased for redemption a total of 60,000 treasury shares with a nominal value of PLN 10 at the price of PLN 125 per share.

1.2. Lines  of business


Mo-BRUK operates in 3 complementary areas of waste management, specialising in waste recovery. The company's operating activities also include 3 business segments outside the waste management sector.

The key areas of waste management activities are:

  • Incineration of hazardous waste, including medical waste.

  • Stabilisation and solidification of inorganic hazardous and non-hazardous waste whose end product is granulated cement.

  • Production of alternative fuel (RDF) from sorted municipal and industrial waste, mainly used by cement plants. 

The company's ancillary activities include:

  • Coal sludge recovery.

  • Construction of roads and concrete surfaces.

  • Sale of liquid fuels in own petrol stations.


The following table sets out the company's core segments, according to the type of service, suppliers and type of customers for which the end products are destined:


Mo-BRUK's main source of revenue comes from the acceptance of waste for treatment and disposal. The Company has sufficient technology, permits and expertise within the area of waste management.


Each customer, with the exception of suppliers of waste constituting scrap, will pay a waste management fee to Mo-BRUK for subsequent disposal, depending on the type of waste and its physical and chemical parameters. physical and chemical parameters. Mo-BRUK then processes the collected waste in a way that maximises the benefits for the environment and itself.


Within waste management, I will briefly explain the process that the company usually follows, so that we can get a good understanding of the business model.

Part of the industrial waste, especially hazardous waste, is incinerated at the Karsy incineration plant, producing steam from it, which is used to dry the alternative fuel produced there.

Industrial and medical waste is incinerated at the Raf-Ekologia Sp. z o.o. waste incineration plant, generating energy in the form of process steam, which is then sold.

Inorganic waste such as slag, filter dust, residues from metal galvanising processes, acids, are subjected to a cementing process which results in a cement granulate that is a substitute for aggregate, which is used in road construction and as a filler material in reclamation works.

From purchased combustible waste, including segregated municipal waste, Mo-BRUK produces alternative fuels, which it then transfers as a substitute for coal.

Then from contaminated ferrous and non-ferrous scrap which constitutes, inter alia, discards from alternative fuel production lines, waste sorting facilities, car shredding lines, electrical waste recycling lines, etc. it separates the metal from the combustible and mineral fraction and sells it in this form.

Finally, as part of ancillary activities, it owns a road and concrete pavement construction plant in Niecew. Mo-bruk carries out additional activities related to service stations, vehicle diagnostics and laboratory.

Another noteworthy fact can be found in the presentation for the first quarter of 2021, which shows the capacity utilisation of the plants in 2020, which allows us to estimate the production potential of the company with the current resources.

1.3. Revenue Performance by Business Line

In this section I will analyse the evolution of revenues over the last few years, and outline the catalysts that have led to the company's impressive rate of growth.

Evolution of Income

Firstly, we can see from this graph that revenue has had a CAGR of 39.61% during the period from 2017 to 2020, then the first half of 2021 compared to the same period in 2020, almost doubled revenue (83.4%).

This growth is attributable to the following changes that have affected the sector and the country in which the company operates: 

Poland is one of the countries that invests the least in waste management. According to the forecasts of the Ministry of Climate and Environment, investments are expected to increase considerably in the coming years.

Taking into account other directives, the EU, which imposes on Poland and other member states the obligation to recycle municipal waste at the level of 55% by 2025 and 65% by 2035. According to the latest available statistics, it was 34% in Poland in 2019. This is because landfills are still the predominant waste management method in Poland, with more than 60% of waste going to one of the 800 landfills in the country.

Then, as a consequence of the above mentioned, the Polish government has established a fee called "Marshal's fee". This is the tax that a landfill must pay to the local authority for each tonne of waste deposited. However, it should be noted that it is not Mo-BRUK, but the landfill sites that are obliged to pay this fee.

The waste management services offered by Mo-BRUK are an alternative to landfill, so the higher the price of landfill, the higher the price Mo-BRUK can obtain.

The following graph shows the evolution of the Marshal fee and the evolution of the prices of each business unit is detailed below.

Evolution of Marshal Fee (PLN / t)

Incineration Line Price Evolution:


Given this market situation, the graph below shows the price dynamics of waste acceptance at the company's incineration plants in recent years. Average prices for accepting waste at the incineration plant since 2017 have increased from 600 PLN/ t to more than 3,350 PLN/ t.


Evolution of Waste Acceptance Prices at the Incineration Plant (PLN / t)

The factors influencing the price level in the incinerated waste segment, in addition to the increase in the Marshal fee, were the Group's use of its competitive advantage in having significant production capacities of waste incineration plants, which to a large extent resulted in the creation of average prices for waste treatment services in thermal processes.

Price Evolution of the Solidification and Stabilisation Line:

The inorganic waste market is characterised by systematic price increases and not directly by the Marshal rate. The graph below shows the price growth dynamics for waste acceptance at the Group's inorganic waste solidification and stabilisation facilities. 

Evolution of Waste Acceptance Prices at the Solidification and Stabilisation Plant
(PLN / t)

The price increase was largely due to increasingly efficient actions by state authorities, which resulted in a significant reduction of the shadow economy.

Alternative Fuel Prices Evolution (RDF):

When alternative fuels are produced from waste, the level of the so-called Marshal fee, i.e. the fee for accepting waste for storage or disposal, plays an important role in the profitability of this activity. It is regulated by the Ministry of Environment. In 2020, the storage fee per tonne of segregated municipal waste as shown above is PLN 270 and, from 2021, it will rise to PLN 276.21. The higher the Marshal fee, the higher the cost-effectiveness of this activity.

The higher the Marshal fee for the storage of mixed and sorted municipal waste, the higher the municipal landfills are forced to raise the price, which also gives Mo-BRUK the opportunity to raise the prices for accepting waste and adjust them to market levels.

The following graph shows the price dynamics for the acceptance of waste for use in the production process of alternative fuels in the company's plants. As mentioned above, it follows a positive correlation with the Marshal fee.

Evolution of Waste Acceptance Prices for RDF Alternative Fuel
(PLN / t)

In this case, as can be seen, prices have risen from 146 PLN/t in 2017 to 562 PLN/t in 2020.

Finally, to conclude this section, the evolution of revenues by business unit is shown, in order to be able to observe how these price increases have materialised in the revenues of each unit.

Evolution Income by Business Line


1.4. Evolution of EBITDA Margin by Business Line


The EBITDA margin increased from 25.2% in 2016 (year of introduction of the Marshal fee) to 57.8% in 2021, maintaining the pace of growth during the first half of 2021.

EBITDA Margin Evolution 

The EBITDA margin situation results from a significant increase in market prices for accepting waste for management, while Mo-BRUK maintains the level of unit costs for waste processing.

What is noteworthy in this section is to estimate whether these margins are sustainable over time, which I will analyse in more detail in the "Business Plan" section, although I can advance that according to the waste management objectives in the European Union, Poland is still far below, having to practically double its current level of waste management in the next 10-15 years, which suggests that the Marshal fee will continue, as it is the measure that is giving effectiveness to the government so that landfills are used less.

1.5. Main Clients and Suppliers


In 2017, the company's 10 largest customers were responsible for generating 35% of revenue, which increased slightly in the following years. In 2020, the top 10 customers accounted for nearly 40% of revenue. With the company's largest customer being responsible for more than 10% of revenue.

He stressed that Mo-BRUK's customers include companies that generate waste, such as industrial companies, local authorities, which are obliged to clean up waste from their facilities, municipal waste sorting plants, companies that collect small quantities of waste and waste traders.

The share of the largest suppliers in relation to turnover has decreased in recent periods from over 30% in 2017 to approximately 16% at the date of this thesis. The dominant supplier is a non-core entity: Orlen Paliwa Sp. z o.o., which supplies Mo-BRUK with liquid fuels to petrol stations. Other entities account for a small percentage and most of them are companies providing transport services.

1.6. Shareholders and Management Team

Before presenting the current shareholding structure of the company, I will explain the "special situation" that occurred in 2020.

The shareholding structure of the company at the date of the public offering and as stated in the prospectus was 55% owned by Ginger Capital Sp. z o.o. (founders) and the investment fund Value FIZ with 43.25%, the float being only 1.74% as can be seen in the table below:

During the public offering, the founding family, through Ginger Capital, sold 526,933 shares equivalent to 27.2% of the stake it held, and then the investment fund Value FIZ sold 526,933 shares equivalent to 34.6% of the stake. With these sales the float increased to 32%.


The justification for this sale by the founding family was that they wanted to distribute part of their family wealth in other investments outside Mo-BRUK and, on the other hand, to increase the company's float, which would allow it to enter the stock market index and be more marketable to investment funds and institutional investors.


The following table shows the shareholding structure after the public offering:

Now, going into the share capital of Mo-Bruk, it amounts to 1,296,254,565 zlotis, consisting of 3,512,885 ordinary shares, 

The following table illustrates the composition of the shareholder structure:

accionariado ingles mbr.PNG

It is worth noting the alignment of the management body within the company, as the owners of Giger Capital sp. Z o. O, who is the main shareholder, are the members of the board of directors and the founding family of Mo-BRUK as shown in the table below:

ginger ingles mbr.PNG


  • Józef Mokrzycki: Founder and President of the Board of Directors.

  • Elżbieta Mokrzycka: Deputy Chairman of the Board of Directors Administration.

  • Anna Mokrzycka-Nowak: Deputy Chairman of Research and Development of the Board of Directors of the Directorate.

  • Wiktor Mokrzycki: Vice President of Commerce of the Board of Directors.

  • Tobiasz Mokrzycki: Deputy Chairman of Construction of the Board of Directors.


Regarding the economic incentives of the executives within the company, on August 18, 2020, the Company adopted an incentive plan that depends on exceeding a certain threshold of the average annual growth rate of EBITDA per share:


1. If the average increase in EBITDA per share is 25% -35% and the accumulated EBITDA of the last three years is at least 250 million PLN, the Board of Directors will receive a bonus in the amount of twice the remuneration .

2. If the average increase in EBITDA per share is 35% -45% and the accumulated EBITDA of the last three years is at least 300 million PLN, the Board of Directors will receive a bonus amounting to three times the remuneration .  

3. If the average increase in EBITDA per share is 45% and the accumulated EBITDA of the last three years is at least PLN 350 million, the Board of Directors will receive a bonus amounting to four times the remuneration.


To close this section, it should be noted that recently (October 7, 2021), the second main shareholder of the company, Value FIZ, has liquidated its position within Mo-Bruk. However, this news does not have to be negative since it is understandable that the investment fund, after having collected large profits in a short period of time, would like to close its position.


Part of the sale generated by Value FIZ was acquired between Nationale-Nederlanden Powszechne Towarzystwo Emerytalne and OFE PZU, Złota Jesień”, who increased their position by 161,000 and 67,925 shares, respectively. Thus arriving at their current ownership percentages.

1.7. Share price evolution

Since its IPO, Mo-BRUK SA has generated a lot of value for its shareholders, achieving a cumulative return of 626%, with a cumulative return of over 300% since 2020. This performance can be attributed to the low analyst coverage of this type of small-cap company (bearing in mind that Mo-BRUK until very recently only published reports in Polish) as well as the special situation, which was a determining factor in its share price. 


The market analysis will focus on analysing the European Union's waste management targets, Poland's position within these European targets and the company's comments on the future of each business line.

Mo-BRUK benefits from the EU circular economy regulation that obliges countries to process waste, which has great prospects for growth due to the targets set by the EU to reach 65% by 2035 in municipal waste recycling. We recall that the latest data published in 2019 Poland only recycles 34% of this waste, so it would be forced to double its recycling capacity in a decade.


In the following graph we can see the methods of municipal waste disposal in some EU countries (2018):

Municipal Waste Disposal Methods in Selected EU Countries (2018)

As the graph shows, recycling and composting as well as the production of energy from waste in Poland are below the EU average.
This situation will require the Polish government to continue to implement measures to promote efficient waste management and to accelerate the disuse of traditional landfills in the coming years. The latter are already experiencing significant price increases due to the Marshal fee, as mentioned in section "1.3".


In its National Development Plan, Poland outlined its waste reduction policy to include a separate collection system, including facilities for recovery, recycling and disposal of unhealthy landfills. Furthermore, as extracted from the "Review of the implementation of EU environmental legislation in 2019", in the case of Poland there is a national sustainable development plan in which the objectives are to increase R&D investments to 2% of GDP.


EU mandates and project funding are also boosting waste management. It should be noted that Poland produces almost 13 million tonnes of waste per year, and this amount is growing by approximately 1 million tonnes per year.


2.1. Perspectives by Business Line


Regarding the market for each of the company's business lines, Mo-BRUK reports the following:


Within the incineration segment, the company states that currently the processing capacity of hazardous waste incineration plants is insufficient in relation to market needs and that it has observed in recent years an increased environmental awareness of companies (waste producers), being in turn willing to bear higher waste management costs in exchange for higher quality. The company therefore expects the growth of this unit to be sustainable over time.


The solidification and stabilisation segment also has positive expectations. There is currently a growing number of municipal incinerators in Poland (9 in operation and 7 under construction), which translates into a market of 0.5 million tonnes per year. In addition, there is a recent interest in waste incineration from thermal energy companies. In addition, there is a potential for market development related to waste imports.


Within the alternative energy unit (RDF), the high Marshal fee has played a key role in the prices that the company can set, and there is also a potential export opportunity to Ukraine, Germany and other European countries, not forgetting that the company can cooperate with power plants in these energy generation processes.


Finally, to conclude this section, it is worth mentioning that the countries with the highest waste reuse rates are: Germany, Sweden, Finland, Belgium, the Netherlands, Denmark and Austria. In these countries between 0.5% and 5% of the waste generated is landfilled. By way of comparison, in Poland the percentage of landfilled waste amounts to more than 42%.


The main trend in the European waste market is the increasing role of recycling and incineration to the detriment of landfilling. Mo-BRUK expects that the changes introduced by the EU Waste Directive, among others, will lead to a further significant reduction of waste storage in Poland and to an increase in the importance of companies such as Mo-BRUK. Therefore, we can consider that the company operates in a suitable market with strong tailwinds.


2.3. Competitive Advantages of the Company


Diversified business model: Mo-BRUK's business model is diversified into three business lines that have similar EBITDA margins and contribute similar revenues. Moreover, thanks to this effective diversification, the company is able to dispose of most of the variety of waste produced in the country, making it a market leader.


Know how: within this competitive advantage is the set of experiences and knowledge that make the company different in the sector. In the case of Mo-BRUK, the company has patented technologies, the company has experience and a high level of knowledge in the treatment of waste such as slag and dust after the combustion process, obtaining the cement granulate that, as explained in the thesis, is used in roads.


Dominant market share: Mo-BRUK's market share in this market ranges between 15 and 25%, according to Eurostat data, which makes the company's leadership in the country remarkable despite being a very fragmented market, where there are a large number of competitors, however, not all of them have the same diversification as Mo-BRUK and, here, is where the company takes advantage of its market share.


2.4. Main Risks of Investing in the Company


Pressure on margins: this is one of Mo-BRUK's main risks, as EBITDA margins have increased explosively to around 58% at present. As I have explained, the tailwinds of the sector and the demands of the European Union, together with the "Marshal" Fee, have meant that the company can increase its revenues with hardly any impact on costs. However, I believe it is difficult for margins to sustain above 60% in the long term, but I will address this in the valuation scenarios discussed below.


Risk associated with licensing and legal procedures: the company's operations are strictly governed by the relevant regulations and require the appropriate permits to operate. Lack of proper and valid permits would mean that operations would have to be discontinued and the risk of administrative sanctions being imposed on the company (although I do not consider this risk to be high, it is present).

On the other hand, the company is exposed to legal proceedings, such as the case a few months ago where a "fee" of around PLN 60 million is demanded for having untreated landfills. It should be noted that, in the past, such proceedings have been withdrawn or considerably reduced.


M&A risks: in March 2021, Mo-BRUK signed an agreement with Deloitte for consultancy on the analysis of foreign markets and M&A transactions in Poland. Ensuring that during 2021 and 2022 there should be corporate transactions. This situation always entails a risk due to the valuations that the company can pay, although I believe that by being advised by a Big Four company, this risk is considerably reduced.




In this section, I will establish my estimates for the period 2021-2025 in order to project the company's financial statements and obtain the intrinsic value of the company, by means of valuation by multiples and DFC.


3.1. Estimates 2021 - 2025


I will set the valuation assumptions in two scenarios, the first one I will call the "normal scenario", to which I assigned a higher probability of occurrence and, secondly, an "unfavourable scenario" in which the company's growth will be tested. 


Normal Scenario


The key elements of this scenario are as follows:


Revenue: as discussed at the beginning of this thesis, the revenue CAGR between 2017 and 2020 has been 39.61%. Moreover, this year (2021), during the first half of the year, revenues increased by 83.4% compared to the same half of the previous year.


The company has not given guidance for the coming years, however, they stress that the market trend remains good. I estimate second half revenue growth of 40% to PLN 154.3 million and total annual revenue of PLN 285.8 million by 2021, equal to a growth of 60.1% Y/Y.


In the coming years, due to the reasons stated in the market analysis, I estimate that the company's revenues may continue to grow, but I will reduce it by up to 20% Y/Y, considering part of inorganic growth due to acquisitions.


EBITDA margin: the company's EBITDA margin has increased from 25% in 2017 to 57% today, as explained above, this is due to increased rates which have not led to a direct increase in the company's costs. In this scenario I will take margins from 57% to 42%. As I believe that, although the environment is favourable, margins are particularly high.


Given the scarcity of peers on which the company can be compared, I have looked at margins of similar companies in other countries, where I have found Waste Connections in the US, which, although it is more diversified and does not have the same tailwinds as Poland or the same special situation, has EBITDA margins of 30%-31%.


Debt: the company currently has Net cash +36.3M PLN Net debt/EBITDA -0.25x. In this scenario we contemplate M&A operations so we expect the company to be able to use the cash and part of the financial debt in future acquisitions.


Capex: Most of the company's investments have already been made, until 2014 Mobruk invested heavily in the expansion of the business. However, due to the strong tailwinds in the sector at present, the company aims to increase its production capacity through investments. I will consider a CAPEX of 4% of sales. 

Unfavourable scenario:


As in the normal scenario, I will mention the most salient assumptions.


Revenues: In this scenario I will be more conservative, estimating revenue growth of 30% in the second half of 2021 compared to the previous year, equivalent to PLN 115.7 million, for an annualised total of PLN 247.2 million. In the following years I foresee a revenue decline of up to 15%, including inorganic growth.


EBITDA margin: in this scenario I will bring margins from 57% to 38%. As a consequence of pressure on margins due to the possible relaxation of Polish government feesor the entry of new competitors in a booming market.


Debt: currently the company has a net cash of +36.3M PLN Net debt/EBITDA -0.25x. In this scenario M&A operations are contemplated so we expect the company to be able to use cash and part of the financial debt in future acquisitions, but to a lesser extent than in the normal scenario where growth is higher.


Capex: (unchanged from the previous scenario): Most of the company's investments have already been made, until 2014 Mobruk invested heavily in the expansion of the business. However, due to the strong tailwinds in the sector at present, the company aims to increase its production capacity through investments. I will consider a CAPEX of 4% of sales. 


3.2. Projections 2021-2025

Normal Scenario

Unfavorable Scenario

proyecciones des.png

3.3. Valuation by DFC


The DFC is a methodology that defines the value of a company to its investors or creditors as the present value of all net cash flows (FCF) that would occur each year, discounted at a discount rate that takes into account the cost of equity and debt.

dibujo FCF ingles.PNG

Determination of the discount rate (WACC)


The WACC discount rate has been determined using the following formula and the procedure detailed below, resulting in a WACC of 8.9% for the normal scenario and 9.1% for the unfavourable scenario.

Optimal capital structure: to estimate the debt/equity ratio I have analysed Damodaran's optimal capital structure proposed for the sector.


In short, I estimate the optimal structure as 20% debt 80% equity in the normal scenario of higher growth and 15% debt and 85% equity for the unfavourable scenario.


Calculation of the cost of equity (Ke): This is the return expected by the shareholder according to his level of risk.


Ke = Rf + βL * (Rm - Rf) = 10.6%.


Note that I have used the Damodaran beta for the sector and the Polish 10-year bond at normal Prepandemia levels.


Cost of debt (Kd): Prepandemic interest rates (2.7%) were taken into account.


Residual Value Calculation

Vr ingles.PNG

The residual value is placed in the last year of the valuation and includes the unlimited economic life of the company, Vr = f (Free Cash Flow).


Calculation of "g" : It has been estimated on the basis of GDP expectations in Poland (2,5%).


Obtaining cash flows:

Normal Scenario

fcf normal.png

Unfavorable Scenario

fcf des.png

DFC result by scenarios

Normal Scenario

Unfavorable Scenario

As we can see both cases provide a considerable Upside 93% in the normal scenario and 34% in the unfavourable scenario. In addition, we can observe the valuation range for different variations in the WACC and "g".

3.4. Valuation by Multiples

As there are no Peers within Poland that can serve as comparables I will apply conservative multiples for a high growth company, giving more weight to the valuation obtained by DFC.


Normal Scenario (PLN)

multiplos normal.png


Unfavorable Scenario (PLN)



After an in-depth analysis of Mo-BRUK, I can say that this is a high quality company with special situations and a very interesting tailwind in the industry and especially in Poland. In addition, the management team is well aligned and M&A transactions are expected in the future, which may further increase the company's share in this fragmented market.


The European Union's municipal waste management targets, together with the Marshal Fee imposed by the Polish government in 2016, have played a key role and in my view will continue to cause companies in the sector to maintain high growth in the coming years.

Regarding valuation, both by DFC and multiples in each of the scenarios described in the thesis, high returns can be achieved in the long term. However, each of the risks described must be taken into account.


* The Investment Thesis of Mo-BRUK SA, was published on this website on 20/10/2021, and in case of needing an update due to publications of results of the company or important facts of the sector, a direct link will be left at the end of this thesis.  


The publications on this website are not investment advice. All contents of this website and newsletter, and all other communications and correspondence from its author, are for informational and educational purposes only and in no way, whether express or implied, shall be considered investment advice, legal or otherwise. Do your own research and due diligence.

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