OLIN Corp (OLN) stock intrinsic value fair value estimate & owner earnings analysis

Olin is North America's largest chlor alkali producer and runs three businesses. Chlor Alkali Products and Vinyls (about $3.7 billion of 2025 sales) makes chlorine, caustic soda, EDC, VCM, chlorinated organics, bleach and hydrogen, with major plants on the US Gulf Coast that depend on long-term power and ethylene supply arrangements. Epoxy (about $1.4 billion) makes epoxy resins and their precursors. Winchester (about $1.7 billion) makes commercial and military small-caliber ammunition and, since October 1, 2020, operates the US Army's Lake City Army Ammunition Plant in Independence, Missouri, under a contract whose seven-year initial term has been extended by three years. Prices for chlorine, caustic soda, vinyls and epoxy swing widely, so Olin's results are deeply cyclical. How we measured earnings. We start from operating cash flow, strip out swings in working capital, and charge stock compensation and capital spending as real costs. We count all capital spending as upkeep: the company describes its roughly $200 million-a-year budget as normal spending to keep its plants running, and revenue changes here come mostly from prices rather than added capacity. We also treat payments under long-term supply contracts (mainly ethylene and energy arrangements, which the company capitalizes and then writes off through depreciation) as capital spending. They totaled about $1.1 billion from 2016 to 2025, including $537 million in 2020. Leaving them out would overstate earnings by roughly $80-110 million a year. Goodwill write-downs, such as the $700 million in 2020, are non-cash and are not charged against earnings. Because Olin carries about $3 billion of debt, we value the business before interest and then subtract what it owes. On that basis, Olin's cash earnings before interest over the full cycle since the October 2015 purchase of Dow's chlorine, vinyls and epoxy businesses were: 2016 $262M, 2017 $327M, 2018 $791M, 2019 $408M, 2020 -$272M, 2021 $2,120M, 2022 $1,710M, 2023 $763M, 2024 $433M and 2025 $231M. The ten-year median is about $420 million, or $3.69 per share on today's roughly 114 million shares. That window covers two troughs and two peaks. The median is not lifted by the 2021-2022 boom. The average including those years would be $677 million. Recent results. Cash earnings fell 47% in 2025, from $433 million to $231 million. Chlor alkali pricing (especially EDC) was weaker, Epoxy lost $103.5 million against what the company calls market saturation from subsidized Asian competition, and Winchester's commercial volumes and prices dropped. Results got worse in the first half of 2026: a pre-tax loss of $114.5 million versus $4.7 million a year earlier. Operating cash flow was negative $40.7 million, and that period included the roughly $185 million payment to Shintech the company said it expected to make after a February 10, 2026 jury verdict on a VCM supply contract. Base case ($21.10 per share). In 2026 the business earns about the same as 2025, $230 million. Several things that weighed on 2025 are dated and will not repeat: the $75 million Shintech charge, $31 million of Stade, Germany supply-contract payments that the company says were completed in 2025, and 2026 capital spending guided to about $200 million versus $226 million. The weak first half of 2026 keeps us from assuming any rise this year. Earnings then return to the full-cycle median of $420 million by 2028. The business reached that level as recently as 2024, despite a $126 million Hurricane Beryl penalty, so this is a return to demonstrated earning power, not growth. We credit no growth beyond that. Capital spending is charged every year, and we carry the story 30 years on long-lived plants and stop there. The business is worth about $5.5 billion. It owes $3.03 billion (June 30, 2026), plus about $60 million for refinancing the 2029 and 2030 maturities above 6%. That leaves about $2.4 billion for shareholders. Bear case (-$9.52 per share). Cash earnings stay at the 2025 trough of about $231 million for ten years, then fade to zero over the following decade as uncompetitive capacity is shut. Olin has repeatedly taken write-offs on closed facilities, for example $77 million in 2016, $59 million in 2019 and $18 million in 2023. In this case Epoxy keeps losing money against Asian imports. Earnings barely cover the roughly $180 million interest bill, so the $669 million due in 2029 and $1.04 billion due in 2030 must be refinanced at well above today's rates. The evidence: Olin's debt was valued at about 93% of face at June 30, 2026, and in February 2026 lenders loosened its covenants while Olin pledged collateral and subsidiary guarantees. The business is worth about $2.2 billion against about $3.26 billion owed including that higher refinancing cost. In this case the company owes roughly $1.1 billion more than it is worth, and shareholders would likely be wiped out in a restructuring. Bull case ($41.69 per share). Olin's position as the largest North American chlor alkali producer lets it capture upcycles of the size it has already shown in 2018 and 2021-2022 about once a decade. That lifts normal cash earnings to $600 million from 2028, still below the decade's $677 million average. The business is worth about $7.8 billion less $3.03 billion of debt. What could make this wrong: a lasting shift of global caustic soda and epoxy supply to subsidized producers would make the bear case the base. A sustained recovery in chlor alkali pricing would push value toward the bull case. Our previous estimate (bear $0, base $19.94, bull $47.98) used a higher, risk-adjusted discount rate, did not charge the supply-contract payments, and did not let the bear case go below zero. The base case rises slightly: the flat 6% rate raises it, while charging the supply-contract payments and using a lower normal earnings level pull it down. The bull case falls because we no longer add growth on top of a recovered earnings level, and the bear case now shows the debt shortfall openly. Margin-of-safety price ($10). Shareholders sit behind $3 billion of debt, so the range of outcomes is very wide: roughly a one-in-ten chance of little or nothing, and about $21 in the middle. From $10, the base case alone implies roughly 28% a year over four years. That comes from the value per share rising to about $24 as debt is paid down once earnings recover, plus the current $0.20 quarterly dividend. That margin is needed to make up for the real chance of a wipeout in the bear case.