HUN — Huntsman Corporation · 2026-09-05 · Verdict: WATCH · Conviction 2
Price $9.40 (2026-09-04 screen close; no live price) · Mkt cap $1.65B · EV $3.63B corrected (screen: $2.96B) · EV/EBIT n/m (GAAP operating loss) · FCF yield 7.0% stale, negative in H1 · Net debt $1.74B excl. affiliates plus $237M NCI · ADV $21.7M Sources read: 10-K 2026-02-18 (Items 1, 1A, 7), 10-Q 2026-07-31, DEF 14A 2026-03-16, 8-Ks of 2026-06-16, 07-30, 08-18 and 08-25, Form 4s (12m).
1. What the business actually does
Huntsman makes diversified organic chemicals in three segments (10-K 2025, Item 1): Polyurethanes ($3,697M of 2025 revenue), MDI, polyols and TPU on about 2.9 billion pounds of MDI capacity, into insulation, construction, automotive and footwear; Performance Products ($997M), amines and maleic anhydride; Advanced Materials ($1,021M), epoxy formulations. Over 6,500 customers in 90 countries, so no concentration. Consolidated joint ventures leak profit: minority holders took $57M of 2025 income and $25M in H1 2026 (Q2 release).
2. Why it is mispriced — the edge case, and why it cannot be closed here
The screen treats HUN as a cheap cyclical. It is no longer that security. On June 15, 2026 Huntsman signed an all-stock merger of equals with Olin: each HUN share converts into 0.5476 Olin shares, a fixed ratio with no collar, leaving Huntsman holders 45.5% of "OlinHuntsman" (8-K 2026-06-16, Item 7.01). Both votes passed on August 25, Huntsman with 99% and Olin with 97% of votes cast (8-K 2026-08-25). Only antitrust clearance remains, with an Outside Date of June 15, 2027 plus two automatic three-month extensions (8-K 2026-06-16, Item 1.01).
A HUN buyer is therefore buying 0.5476 Olin shares, and this bundle holds no Olin financials and no Olin price, so what you receive cannot be valued from these documents. That is the finding, not an aside: valuing HUN standalone values the wrong claim. The one genuine edge signal is Peter Huntsman, already a 5.1% holder (DEF 14A 2026), buying 100,000 shares at $9.81 on 2026-08-03, the only open-market insider transaction in twelve months against zero sales (Form 4), after terms were fixed.
3. Unit economics and growth
Adjusted EBITDA went $472M (2023) to $414M (2024) to $275M (2025), down 42% on revenue down 7%, with a $131M GAAP operating loss (10-K, Item 7). The turn has started: Q2 2026 adjusted EBITDA was $120M against $74M, all three segments up, on 4% volume growth and 8% local-currency price and mix (Q2 release). H1 is $193M against $146M.
Cash says otherwise. H1 2026 free cash flow was negative $181M against negative $52M a year earlier, on a $201M working capital build. Net debt excluding affiliates rose from $1,582M to $1,741M in six months and liquidity fell 35%, from $1,323M to $857M (10-K and 10-Q). Adjusted net income in the best quarter in two years was exactly nil. The screen's 7.0% FCF yield is CY2025 arithmetic and does not describe 2026.
4. Balance sheet and capital allocation
Total debt is $2,087M against $346M of cash; $364M is current, mostly revolver, and the $800M facility signed 2026-02-09 runs to 2031, so no maturity wall (10-Q). Allocation is defensive: the dividend was cut 65% to $0.0875 a quarter on 2025-11-03 (10-K, Item 7), and both the 10-K and 10-Q say no shares will be repurchased in 2026 despite $547M authorized. Share count rose 0.9%. Directors and officers hold 6.8%, nearly all Peter Huntsman's (DEF 14A 2026).
5. Management: said versus did
Peter Huntsman called Q2 "a solid quarter" (Q2 release) in a period with nil adjusted earnings and negative $90M of free cash flow. More usefully, management's own merger-proxy plan: adjusted EBITDA of $346M (2026), then $501M, $745M, $914M and $1,160M through 2030 (8-K 2026-08-18, Huntsman standalone projections). That is EBITDA more than tripling in four years from a level the business has not approached in the three years the 10-K shows, and 2027 unlevered free cash flow is still only $114M as capex steps to $185M.
6. Valuation
Correct the screen first: its $2.96B EV uses year-end long-term debt, and adding $364M of current debt, the larger A/R balance and $237M of minority interest gives $3.63B, or 10.5x 2026E, 7.2x 2027E and 4.9x 2028E adjusted EBITDA on management's projections. Citi's peer set traded at a 2026E median of 8.6x and 2027E median of 7.9x (8-K 2026-08-18): dearer on 2026, in line on 2027.
Bear: 2027 EBITDA reaches only $400M and 6.5x gives about $3.50 of equity. Base: the $745M step lands a year late, 2029 at 6.5x discounted three years at 11%, about $12.50. Bull: the plan holds, $914M in 2029 at 7.5x on flat net debt, about $27. Weighted 35/45/20 gives roughly $12.20, 30% above $9.40. Reverse DCF: at a 9% cost of capital and 2% terminal growth, $3.63B of enterprise value implies about $254M of perpetual unlevered free cash flow, roughly management's own 2028 figure of $288M held flat forever and 39% of its 2030 projection. The price is not demanding the hockey stick, but it is demanding 2028.
7. Catalysts and timeline
Antitrust clearance, then closing, guided to H1 2027. Synergies of $300M+ within three years and $400M+ at run rate, plus ~$125M of NOL cash tax benefits (8-K 2026-06-16). Q3 2026 results, the first test of whether the Q2 step up continues.
8. Kill criteria (pre-registered)
- An 8-K reporting termination of the Merger Agreement, an adverse recommendation change, or any amendment to the 0.5476 ratio.
- Q3 and Q4 2026 adjusted EBITDA both at or below the $120M Q2 print, saying the 2027 step to $501M is not happening.
- Net debt excluding affiliates above $2.0B, or cash plus unused borrowing capacity below $700M (it was $857M at 2026-06-30).
- Insider net selling above $2M, or Peter Huntsman reducing his 5.1% stake.
9. Verdict and summary
WATCH, conviction 2. Huntsman is a real cyclical trough that has begun to turn, with Q2 adjusted EBITDA up 62% on volume growth in all three segments and a CEO who already owns 5.1% adding 100,000 shares at $9.81, the only insider open-market trade of the past year. Two things stop this being an idea. First, since both shareholder votes passed on August 25 HUN is not a chemicals equity, it is a fixed claim on 0.5476 Olin shares pending antitrust clearance, and no Olin financials or price exist in these documents, so the security you actually receive cannot be valued here. Second, on what can be verified it is not cheap: correcting the screen's enterprise value for $364M of current debt and $237M of minority interest gives $3.63B, or 10.5x management's own 2026 EBITDA against a peer median of 8.6x, and the 7.0% free cash flow yield is stale 2025 arithmetic against negative $181M in H1, with liquidity down 35% in six months, the dividend cut 65% and the buyback off. Even at $9.40 the price demands that management's 2028 be delivered and held forever. Revisit when Olin's numbers can sit beside these, or if the deal breaks and Huntsman is standalone again at a price discounting the trough, not the plan.
Research for discussion, not investment advice. Positions and sizing are the reader's decision.