Darling Ingredients at Conference: Reiterating Renewable Diesel Rebound Amid Cash Conversion Questions

What happened

Management presented at the 21st Annual Global Farm to Market Conference, reinforcing the renewable diesel recovery narrative that has driven the stock 94% higher over the past year. The presentation likely failed to resolve the critical tension identified in our analysis: Q1’s $406.8M Combined Adjusted EBITDA masked a $190.1M cash contribution for hedge margin calls and a $48.4M inventory adjustment. Core ingredients EBITDA guidance of $260-275M and a ~320M gallon DGD production target for Q2 remain the next tangible proof points. At $63, the stock sits above our attractive entry of $56 but below the trim level of $78, with the valuation already pricing in a smooth recovery. Our WAIT rating holds until Q2 results confirm whether reported earnings translate into sustainable cash generation for deleveraging.

Implication

The conference presentation offered no new data to resolve the cash quality debate. Investors should remain on the sidelines until Q2 2026 provides evidence that DGD production meets the ~320M gallon target and hedge funding needs decline from Q1’s $190M. If core ingredients EBITDA holds above $260M, the stock could re-rate toward our base case of $70, but the current $63 valuation already prices in a smooth recovery. Wait for the Q2 print to avoid paying for unconfirmed cash flow improvement.

Thesis delta

The thesis remains unchanged: we need proof that higher DGD utilization converts into free cash flow rather than working capital swings. The conference did not alter the 3-6 month re-assessment window or the triggers defined in our report. Keep the WAIT rating with $56 attractive entry and $78 trim level, as the stock continues to trade at a risk premium that is not yet justified by the cash generation evidence.