NLI HOLDINGS, INC. (NL) stock intrinsic value fair value estimate & owner earnings analysis

NL Industries is a holding company. Valhi owns about 83% of it, and Valhi is in turn about 91% owned by a Contran Corporation subsidiary controlled by Lisa K. Simmons and a family trust, so very few NL shares trade publicly. NL's value comes from three things: (1) 87% of CompX International, a U.S. maker of security products (locks and latches) and marine components that makes substantially all of its products in the United States and sold $158.3 million in 2025, nearly all of it to U.S. customers; (2) 35.2 million shares (about 31%) of Kronos Worldwide, a cyclical producer of titanium dioxide (TiO2) white pigment; and (3) cash and about 1.2 million Valhi shares held by the parent. Against these sit the parent's ongoing costs from businesses it no longer owns, mainly lead-pigment litigation and environmental cleanup at old lead smelter and mining sites. How we value it. NL's reported cash flow counts Kronos only by the dividends it pays, and Kronos cut those sharply: NL received $26.8 million in 2023 but only $7.0 million in 2025. Valuing the stake on a dividend that can be turned on and off would understate or overstate it depending on the year. Instead we value each piece on what it actually generates, then add them up. Interest earned on cash is left out of the cash-flow figures because the cash itself is counted separately. Legacy litigation and environmental costs are charged when NL books them as liabilities, not when the cash leaves, so big one-off years are spread correctly: 2018 (when NL recognized its liability in the Santa Clara, California lead-pigment case, later settled for $101.7 million, the last $16.7 million paid in October 2025) and 2024 (about $31.4 million of income when the Raritan Bay Slag Superfund site in New Jersey was settled; NL paid $56.1 million plus interest in early 2025) were left out of our normal-year figures. CompX. After removing interest income, CompX's cash generation for owners ran about $14.5M (2019), $11.4M (2020), $15.9M (2021), $19.8M (2022), $20.1M (2023), $14.6M (2024) and $17.0M (2025). That span covers the 2020 COVID dip, the boating boom of 2021-2022, the marine bust of 2023-2024 and the 2025 partial recovery, so we use its middle value, about $15.9M a year. CompX's 2025 figure rose about 16%; our first year assumes $15.9M, below that, because 2025 included a one-time stocking order from a towboat maker. We credit no growth: CompX's sales gains have come from the boating cycle and pricing, not from secured contracts or a repeatable expansion program. The business has no debt and holds about $52 million of cash plus a $6.8 million loan to Valhi (mid-2026); we count all but $10 million of that as surplus. Kronos. Kronos's cash generation before interest swung from about $117M (2019), $85M (2020), $168M (2021), $115M (2022) to a loss of $62M (2023), $130M (2024) and a loss of $40M (2025). We left out the 2017-2018 boom years. Kronos borrowed heavily in 2024, partly to pay $156.8 million for the remaining interest in its Louisiana pigment joint venture, and at mid-2026 owed $569.6 million against $26.6 million of cash. Most of that is euro-denominated 9.50% senior secured notes due 2029 ($503.7 million at year-end 2025), plus a $53.7 million term loan from Contran. Because those notes cost well above our 6% rate until 2029, we add about $36 million to what Kronos owes, for about $577 million in total. Our first year assumes about $40M before interest, well above 2025's loss. We expect that improvement because of reported results, not hope: first-half 2026 sales were $1,068 million versus $984 million a year earlier, and second-quarter operating income was $37.6 million versus $7.4 million. The first quarter was weaker than a year earlier, though, so we phase the recovery in slowly. Kronos also reports new European Union anti-dumping duties on Chinese TiO2 and plant closures by several competitors in China and Europe. Base case (median): CompX earns about $15.9M a year for 40 years. That is flat in dollars, so it shrinks after inflation; nothing in the filings ends these product lines, and the spending needed to keep them running is already charged. That piece is worth about $239M; adding $49M of surplus cash and taking NL's 87% gives about $251M, or $5.13 a share. Kronos earns $40M before interest in year one, $80M in year two, then its 2019-2025 middle value of about $115M for 30 years in total. The capital spending we charge keeps the plants running, but we stop at 30 years rather than assume they run forever. Kronos's business is worth about $1,475M; less the $577M it owes, its shares are worth about $898M, or $7.80 each, and NL's 35.2 million shares about $275M, or $5.62 per NL share. The parent's legacy and overhead costs ran about $6-8M a year, net of tax effects, over 2020-2025, and NL says 2026 litigation costs will be higher, so we charge $8M a year for 40 years, about -$120M. Parent cash of about $55M (less $10M kept for operations), plus Valhi shares carried at $17.6M, less $12.7M of accrued environmental costs and a $0.5M loan, adds about $49M. NL itself has essentially no debt. Total: about $454M, or $9.29 per share. Bear case (10th percentile): Chinese oversupply and weak European demand persist, so Kronos repeats its 2022-2025 pattern, averaging about $35M a year before interest after a zero first year, then its European capacity fades away over the following decade. That does not cover its interest bill, which was $47 million in cash in 2025. Kronos's business would be worth about $296M against $577M owed, about $281M short, so its shares would be worthless; the 2029 maturity would likely force a restructuring. NL is not responsible for Kronos's debts, so its stake counts as zero, not as a negative. CompX falls back to about $13M a year for 30 years, close to its 2016-2020 average of about $12.4M, which is worth about $199M to NL after surplus cash. Parent costs run $9M a year (-$124M). Environmental costs reach the top of NL's own estimated range, $26M for roughly 27 sites, instead of the $13M accrued. We also assume one more legacy settlement of $25M in year three, because NL paid two large ones in the past decade and still has lead-pigment cases pending and sites it cannot estimate. Total: about $89M, or $1.83 per share. Bull case (90th percentile): CompX's price increases keep pace with tariff-driven cost increases and government and industrial demand holds near 2021-2025 levels, about $18.5M a year for 50 years (NL's share with surplus cash: about $297M, $6.07 a share). Kronos benefits from the EU duties, competitor closures and full ownership of the Louisiana plant: $90M in year one, $130M in year two, then $150M a year for 30 years in total, between its 2024 ($130M) and 2021 ($168M) results. Its business would be worth about $1,990M; less $577M owed, that is $1,413M, or $12.28 per Kronos share, so NL's stake is about $432M ($8.84 a share). With parent costs of $6.5M a year (-$103M) and $49M of parent net assets, the total is about $675M, or $13.82 per share. Change from our previous estimate. Our last estimate (bear $6.66, base $10.83, bull $15.95) valued the Kronos stake at its market price and used higher, risk-loaded discount rates. We now discount at a flat 6% and value Kronos from its own cash flow and its debt. That raises the stake's value in the base and bull cases but makes it worthless in the bear case, because Kronos is now much more indebted. We also charge the parent's legacy costs explicitly. Most of the gap to the old bear case comes from the Kronos debt. Margin-of-safety price. The range is wide, $1.83 to $13.82, and almost all of the spread comes from Kronos, a leveraged commodity producer. NL paid $0.36 per share in regular dividends in 2025 plus a $0.21 special, and declared $0.10 for the first quarter of 2026. With Kronos paying little, we do not count on the dividend continuing at that level. The margin-of-safety price is $5.00: from that price, reaching our base value within three to four years plus dividends implies better than 20% a year, and the CompX stake plus parent cash alone (about $3.70 a share after parent costs) cushions a Kronos failure. Above that, the bear case takes too large a share of the expected return. Holding-company shares controlled by one family can trade at a persistent discount, which is another reason the margin-of-safety price sits well below the base case. What could make this wrong: a new adverse lead-pigment verdict or newly identified environmental site; a failed or expensive Kronos refinancing in 2029; decisions by the controlling family that favor Contran or Valhi over NL's minority holders, such as loans to affiliates or a buyout on unfavorable terms; or a stronger and more durable TiO2 recovery than we assume. NL reports deferred tax liabilities of about $57 million. We do not subtract them, because NL books deferred taxes on its share of Kronos's undistributed earnings while the dividends it actually receives from Kronos are tax-free (both are in the same U.S. tax group), and we do not assume the stake is sold. CompX's 2019 interest income was not separately available and was estimated; this does not change the middle value used.