Huntsman: A Strong Cyclical Play, But Patience Is The Key

Core Viewpoint - The company is experiencing a cyclical decline in sales and EBITDA, but there are signs of stabilization and potential for recovery in the long term, particularly with a diversified product portfolio that caters to both discretionary and non-discretionary sectors [2][5][24]. Group 1: Company Performance - The company's revenues have declined by 31% from 2014 to 2022, while gross profits decreased by only 20%, indicating a 270 basis points improvement in gross margin [8]. - The management has expressed caution regarding the sustainability of any performance improvements, emphasizing the importance of maintaining an investment-grade rating over short-term gains [3][6]. - The company has seen a significant reduction in full-time employees, down 63% from 16,000 in 2014 to 6,000, alongside stagnant machinery value on the balance sheet [5]. Group 2: Market and Economic Conditions - The company operates in various industries, including automotive, aerospace, and construction, which helps stabilize demand during economic downturns [2]. - Despite a growing US economy, the company faces challenges in raising product prices, which could prolong the current depressed market conditions [23]. - The management is optimistic about long-term prospects due to upcoming projects and potential growth in the electric vehicle (EV) sector, although they remain cautious about immediate pricing power [6][24]. Group 3: Financial Outlook - The company expects to unlock approximately US$150-200 million in additional EBITDA from developments in the EV space, but this is contingent on solid sales volume growth without compromising pricing [6]. - The balance sheet appears healthy, which could support a recovery in earnings per share (EPS) if macroeconomic conditions improve [8][24]. - Analysts suggest that the stock price may have bottomed out, presenting a potential accumulation opportunity, especially if profitability begins to improve [14][21].