Huntsman Corporation: A Value Investor's Case for Distressed Industrial Resilience

In the shadow of a cyclical downturn in the global chemical industry, Huntsman Corporation (HUN) has emerged as a compelling case study for value investors seeking opportunities in distressed industrial assets. The company's recent challenges-exemplified by an unplanned outage at its Rotterdam Polyurethanes facility-have pushed its fourth-quarter 2025 adjusted EBITDA forecast to the lower end of its $25 million to $50 million range, with a $10 million direct hit from the disruption according to the company's outlook. Yet, beneath the headlines of operational setbacks lies a story of resilience: strong free cash flow, aggressive cost-cutting, and a balance sheet that, while strained, retains critical liquidity. For long-term investors, the question is not whether Huntsman is struggling, but whether the market has overcorrected in its pessimism.

The Fund's $10 Million Bet: A Signal Amid the Noise

While the identity of the specific institutional fund that placed a $10 million bet on Huntsman remains undisclosed, the broader institutional landscape tells a more nuanced story. Vanguard Group, BlackRock, and AQR Capital Management have all increased their stakes in HUN in recent quarters, with AQR's holdings surging by 29.84%. These moves suggest that professional investors see merit in Huntsman's long-term strategy, even as short-term headwinds persist. The $10 million reduction in EBITDA from the Rotterdam outage, though significant, is a temporary blip in a sector prone to volatility. As one analyst noted, "The market is pricing in a permanent impairment", but Huntsman's operational flexibility and cost discipline suggest otherwise.

Free Cash Flow and Cost-Cutting: The Engine of Resilience

Huntsman's third-quarter 2025 free cash flow from continuing operations reached $157 million, a 68% increase compared to the same period in 2024. This cash generation, coupled with a restructuring program targeting $100 million in savings by 2026, underscores the company's ability to navigate downturns. Management has already achieved an annualized $40 million in cost savings through facility closures and a 500-employee reduction. These measures, while painful, are critical for preserving liquidity in a sector where margins are razor-thin.

The balance sheet, though burdened by $1.636 billion in net debt as of Q2 2025 according to the latest earnings report, retains a $1.4 billion liquidity buffer in combined cash and unused borrowing capacity according to the Q3 earnings announcement. This financial flexibility allows Huntsman to weather short-term disruptions without resorting to desperate measures. As the company's CFO recently stated, "We're not just cutting costs-we're repositioning for a recovery".

Valuation Discrepancies and the Path to Recovery

Despite these strengths, Huntsman's stock trades at a premium to its intrinsic value. A 2-stage DCF model estimates a fair value of $8.76 per share, while the current price of $10.61 implies a 21% overvaluation . Analysts have set a price target of $9.92, 13% above the DCF estimate . This disconnect reflects the market's skepticism about the chemical sector's near-term prospects. However, value investors often thrive in such environments. Huntsman's dividend cut-reducing the payout to $0.0875 per share, a 65% decline-signals a prioritization of capital preservation over shareholder returns, a trade-off that could pay dividends when the cycle turns according to the Q3 earnings release.

The Case for Patience

The Rotterdam outage, which is expected to resume production by mid-December, is a textbook example of short-term volatility that defines cyclical industries. For investors with a multi-year horizon, the key is to distinguish between temporary setbacks and structural weaknesses. Huntsman's cost-cutting initiatives, liquidity reserves, and institutional backing suggest the former. The company's ability to generate free cash flow even amid a net loss in Q3 2025-$25 million-demonstrates operational resilience.

In the end, the $10 million bet on Huntsman is not just about a single facility or a single quarter. It's about a company that has shown it can adapt to adversity. As the chemical sector inches toward recovery, the question for value investors becomes whether they're willing to bet on Huntsman's ability to outlast the downturn-and outperform in the upturn.