Huntsman's Optimistic Outlook Clashes with Deep Value Caution on Valuation and Leverage

What happened

A recent Seeking Alpha article portrays Huntsman as a compelling long-term value opportunity after enduring a severe industry downturn, with management implementing aggressive cost cuts and securing an $800 million credit facility to bolster liquidity. Despite Q4 EBITDA halving and leverage rising to 5.8x, the article highlights management's focus on survival and deleveraging, targeting at least $90 million in free cash flow for 2026 to cover the reduced dividend. However, the DeepValue master report reveals that the stock trades around $10.4 per share, significantly above a conservative DCF estimate of $6.3, indicating no clear margin of safety. The report notes elevated leverage, negative interest coverage, and ongoing net losses, with the company in an extended cyclical trough and facing execution, regulatory, and European exposure risks. Consequently, the report advises a 'WAIT' stance, suggesting the equity may already price in a recovery without sustainable earnings improvement.

Implication

The optimistic narrative from the article is undermined by the DeepValue report's critical analysis, which shows the stock lacks a margin of safety at current prices. High leverage at 5.8x net debt/EBITDA and negative interest coverage create substantial downside risk if the cyclical upturn is delayed or falters. While liquidity and cost savings offer some near-term support, the company's significant European exposure and regulatory pressures on core products add to the uncertainty. Investors should closely monitor operational recovery, deleveraging progress, and any signs of earnings sustainability before considering an investment. A cheaper entry point or clearer evidence of sustainable profitability is necessary to shift from a 'WAIT' to a more favorable stance.

Thesis delta

The Seeking Alpha article's portrayal of Huntsman as a value opportunity does not fundamentally alter the DeepValue report's thesis, which remains based on cautious, data-driven analysis. The report's assessment—highlighting no margin of safety, elevated leverage, and persistent risks—is reinforced by the article's acknowledgment of the severe downturn, indicating no shift towards a buy recommendation. Therefore, the thesis stays unchanged: investors should wait for better risk-reward dynamics or clearer signs of recovery.