Derichebourg: Family-Owned Cyclical Opportunity with Secular Growth

Juan Huerta de Soto of Cobas Asset Management presented his investment thesis on Derichebourg (France: DBG) at European Investing Summit 2025.

Thesis summary:

Derichebourg is a French-listed leader in scrap metal recycling with #1 market positions in France (~40% share) and Spain. Juan notes this core business, representing 90% of EBITDA, possesses high barriers to entry based on regional economies of scale, a dense network that is difficult to replicate organically, and a highly regulated environment that advantages incumbents. The company also operates a smaller, stable public sector services business (10% of EBITDA) and holds a 48.3% stake in Elior Group, a separate, publicly-traded catering company.

The thesis is supported by a family-run management team with long-term alignment; the Derichebourg family owns 41% of the company. Juan highlights the team’s operational expertise, led by Chairman Daniel Derichebourg and Deputy CEO Abderrahmane El Aoufir, who has been with the company for over 40 years. Capital allocation is focused on disciplined M&A at cycle bottoms to gain market share and the payment of dividends.

Juan argues that the inherent cyclicality of the recycling business, which is tied to macroeconomic activity for both scrap supply and end-market demand, provides the mispricing and attractive entry point. The company mitigates this volatility by increasingly focusing on higher-margin, non-ferrous “niche” businesses. The 48.3% stake in Elior, which Juan believes the market ascribes no value to, also adds a non-cyclical, asset-light business. The recent restructuring of Elior is now complete, with margins and FCF improving, and a potential dividend from Elior could serve as a catalyst for Derichebourg.

The core recycling segment is also supported by a long-term secular growth trend, as EU regulations favor scrap metal recycling to meet energy transition and CO2 emission reduction goals. Using scrap is substantially less energy- and carbon-intensive than primary mining, with Juan noting an 86% reduction in CO2 emissions for steel produced via scrap-EAF.

The shares recently traded at a very attractive valuation. Juan calculates that after deducting the market value of the Elior stake, Derichebourg trades at approximately 2x EV/EBITDA and 4-5x P/FCF. This is a steep discount to its closest publicly traded peer, Sims (7.5x EV/EBITDA and 14x P/FCF), and the recent M&A transaction for peer Radius (8x EV/EBITDA and 12x P/FCF).

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About the instructor:

Juan Huerta de Soto Huarte is a member of the Investment Team at Cobas Asset Management. Juan started his career as a buy-side analyst at Bestinver Asset management, which he later continued at azValor Asset Management. Juan is a non-executive Director of España S.A., a 95-year-old life insurance Spanish Company. Having taken a double degree in Law and Business Administration at the Universidad Complutense of Madrid, he was awarded a master’s degree in Austrian Economics by the Universidad Rey Juan Carlos. Additionally, Juan is an Adjunct Professor of Finance at Instituto de Empresa (IE) University in Madrid.