Orion Engineered Carbons (OEC), mcap=$1bn, price $17.29 vs $17.30

– Producer of rubber black and specialty chemicals.
– FCF is at an inflection point as capital constraints unwind.
– Structurally improved pricing and profitability in commodity rubber black will increase margins and returns on capital.
– Expected to double EBITDA and generate more than half of mcap in cash over the next 3 years.
– Misperceived as a cyclical chemical commodity producer.

– Currently sits at 5.5x ‘22 and 5.0x ‘23 EBITDA.
– On a mid-cycle basis, trades at 20-25% FCF yield and below 4.0x EBITDA.
– At 8x ’25 EBITDA (in line with historical levels), would be $59 stock.

Exp. gain: +240% to $59/share.

Full $OEC write-up (free guest account required):

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