Zacks Highlights Demilec Expansion and Possible Olin Merger, but Unconfirmed Catalysts Leave Huntsman a WAIT

What happened

Zacks published a bullish note on Huntsman, highlighting the expansion of its Demilec downstream polyurethane systems business and a potential merger with Olin as catalysts for a re-rating. This contrasts with the ongoing fundamental picture described in our latest DeepValue report, where Huntsman remains in an extended cyclical trough with negative net income, elevated leverage (net debt/EBITDA ~5.8x), and negative interest coverage. However, the company has been actively restructuring, achieving positive free cash flow in recent quarters despite losses, and shifting toward higher-margin specialty products. The stock has fallen 46% over the past year but still trades above a conservative DCF estimate of $6.3 per share, suggesting limited margin of safety at the current price near $10.4. The new article's claims, especially regarding the Olin merger, are unconfirmed by SEC filings and should be treated with skepticism until further details emerge.

Implication

Short-term, the stock may react positively to merger speculation, but without concrete terms, any rally could be short-lived. Medium-term, the core investment case remains contingent on execution of cost savings and a demand recovery in polyurethanes and advanced materials. The balance sheet remains stretched, with net debt/EBITDA near 5.8x and negative interest coverage, so a failed merger or prolonged downturn could pressure the equity further. A confirmed merger with Olin could improve scale and product diversification, but investors must assess the deal's financing, integration risks, and regulatory hurdles. Until more clarity emerges, we maintain a WAIT stance and would look for either a pullback toward the $6-7 DCF anchor or visible improvement in quarterly EBITDA before endorsing a buy.

Thesis delta

The previous DeepValue report assigned a WAIT rating based on Huntsman's depressed earnings, elevated leverage, and insufficient margin of safety. The new article introduces two potential positive catalysts—Demilec's downstream expansion and a possible Olin merger—that were not part of our prior analysis. However, given the lack of confirmation and details on the merger, we do not change our WAIT stance; we simply add these items to our watch list as potential triggers for an upgrade if they materialize with favorable terms.