Most investors chasing the green energy transition head straight for lithium miners or solar stocks.
But there is a quieter, less glamorous, and arguably more interesting way to play the same trend.
Sims Ltd (ASX: SGM) is the world's largest publicly listed metal and electronics recycler, and the forces driving demand for recycled metals are only getting stronger.
The company provides a crucial circular economy service that reduces the need for new metals and electronics.
What Sims actually does
Sims operates across five business segments, buying, processing, and selling ferrous and non-ferrous recycled metals across 30 countries.
The company also provides IT asset disposal and lifecycle services through its Sims Lifecycle Services division.
Consequently, every electric vehicle manufactured, every wind turbine installed, and every data centre built creates a source of future recyclable material and a driver of demand for the recycled metals Sims produces today.
In that sense, Sims sits at both ends of the green energy supply chain simultaneously.
The numbers are turning in the right direction
Sims delivered a 70.9% jump in underlying net profit after tax to $60 million for the half year ended 31 December 2025, alongside a 3.7% lift in sales revenue.
The standout performer was Sims Lifecycle Services, which delivered a 247.5% jump in underlying EBIT, driven by surging global demand for used DDR4 chips as hyperscale and AI data centre builds accelerate.
Moreover, the North America Metal and SA Recycling divisions both delivered higher trading margins, even as volumes from processed scrap reduced slightly.
Sims shares have comfortably outpaced the performance of the ASX200 these past 12 months.
The FY2026 outlook
In March 2026, Sims flagged an expected FY2026 underlying EBIT of between $350 million and $400 million.
This was driven by a strong third quarter and a materially improved second half in both its North America Metals and SA Recycling divisions.
Management noted that despite continued high Chinese steel exports putting pressure on scrap prices, Sims' Metal business remains supported by robust non-ferrous pricing and a focus on sourcing more unprocessed material.
Through its SA Recycling investment, the company has also achieved an 8.3% compound annual growth rate in sales volume from FY2021 to FY2026, with 147 operational facilities now running across 15 US states.
Furthermore, the company's Investor Day in Nashville confirmed a busy pipeline of bolt-on acquisitions through SA Recycling, reinforcing the long-term growth ambition.
Foolish takeaway
Sims does not attract the same headlines as the more trendy names in the green transition.
However, as a critical enabler of the circular economy, it benefits from the same tailwinds as lithium miners and solar developers, while offering a more established earnings base and a more attractive valuation.
For investors looking for an ASX metal recycling stock with genuine long-term credentials, Sims deserves serious attention.
The post Why this ASX stock could be a surprise winner as metal recycling demand surges appeared first on The Motley Fool Australia.
Motley Fool contributor Mark Verhoeven has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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