M. Winter

Going concern risk aside (lol), with oil/naptha prices coming back in post-Iran detante, $BAK should benefit relative to ethane based producers. While PE and PP prices may come in a bit with oil prices coming down, have to imagine they stay relatively well bid given the physical destruction of so much Middle East supply/capacity over the past 2 months.

The majority of the $BAK feedstock is naptha. Those spreads haven't really blown out like US Ethane spreads which help $DOW and $LYB. $BAK still levered to ethane, which is no doubt helping them, but its less than a quarter of their feedstock. $BAK will run if/when the market realizes BK is off the table and Brazil nat. resources companies deserve a geopolitical premium given the reality on the ground in the Middle East. PE-Naptha Spread Below:

$BAK $DOW $LYB chemical prices exploding and Braskem is the only one that doesn’t move. This market is an absolute crock of shit.

Naphtha spreads have not widened to the same extent as ethane spreads, but the directional rate of change is decidedly up. A lot of structural and operational issues ongoing, but have to imagine BK risk is off the table and a big geopolitical premium should be placed on these western hemisphere energy assets like $BAK and $PBR

I had chat GPT use your chart and BAKs equivalent 10-K filing to find out 2026 ebitda using todays spreads and they were within 5% of each other Long story short this is a $1.76 billion company with a $1.25 billion ebitda •Brazil PE spread: about $337/t •Mexico PE-ethane spread: about $855/t •U.S. PP spread: about $550/t $BAK

$BAK quick and dirty. $BAK uses North American natural gas-linked feed stocks to produce plastic resins and other chemical base products. US/N. Am. Ethane is a primary feedstock and their end products are generally priced with a rough oil (brent) price linkage. The PE-Ethane spread, a good indicator of $BAK profitability has blown out following the war outbreak in Iran. The spread was in the $700/mt range pre-conflict, and is now ~$915/mt, with momentum accelerating to the upside given a cascade of chemical plant force majeures in the ME and Asia over the past few days. A lot of petchem supply offline in the Middle East and Asia and obviously oil prices are up, while US natural gas/ethane prices have remained largely flat. $BAK is a spread business and recent developments have been good for margins. In 2018, the $BAK PE-Ethane spread was $978 for the year according to the chart below from US. The company did $3B of EBITDA in 2018. Consensus is looking for ~$1.1B of EBITDA in 2026 (Second chart below from UBS). That's a big delta... Enterprise Value as of right now is ~$12BN, so that’s a ~12x multiple on consensus EBITDA for 2026. Call it 10x just to be conservative. 10x * $3bn = $30bn EV. Less ~$11B net debt is ~$19Bn implied market cap. Market cap today is…$1.5Bn That's a big delta... Spreads obviuously need to stay at current levels for a while and the company needs to operate well (certainly no guarantee), but $BAK capital structure is 90% debt and obviously it has a huge fixed cost base. So big financial leverage+big operating leverage+unexpected positive inflection in pet chem margins. Market just has to believe this thing is not going BK…which, don’t get me wrong, it very well still might…but even the prospect of no BK could result in a 2-3x from current prices…let alone the 10x+ scenario I just laid out above… No material debt maturities until 2028 and Brazil elections in October (slim possibility of a swing to the right...), so likely have some time regardless until a restructuring is a forced requirement. Probably the highest beta oil bet in the market today and the stock really hasn't begun to reflect the prospects of a protracted war in Iran and structurally higher oil/petchem prices. $BAK charts courtesy of UBS. @calvinfroedge @contrarian8888 @hkuppy

$PBR Stock currently trades at 3.75x LTM EBITDA Historically, the LTM EBITDA multiple has ranged from 5-9x. From 2021-25 abject investor apathy for energy stocks following the covid bear market led the stock to trade <4x. This period of below-average valuation was anomolous relative to historical levels as seen in the chart below. Given recent dsiruptions in oil supply and the associated logistics/supply chain in the Middle East, I'd argue North/South American energy supplies warrant a premium due to thier insulation from war in the middle east. You can make your own assumptions about the go-forward price of oil (my bias is higher over the next 12 months vs. the last 12 months for obvious reasons)...but suffice to say that even if the LTM valuation multiple re-rates to just 7x LTM EBITDA , which would be essentially the average multiple from the 2005-2019 era, and we get no incremental help from oil prices, the stock is a double. And that doesn't factor in oil prices potentially being structurally higher by 20-40%+ going forward vs. the past 5 years. Great growth prospects at $PBR as well and dividend yield of ~6% with room to increase in the years ahead. Also slight chance of a political shift to the right following elections in October, which would be coup de grace. Stock has been on a heater, but this is an add on a dip towards the 50-day around $15.

OPEC are the only oil producers who had excess oil production capacity immediately available prior to the war breaking out with Iran. And that excess capacity was small at ~2mbpd (2% global daily output). That excess supply obviously now compromised/at risk. US production capacity is flat to down over the next 12-24 months, with meaningful capex/rig adds required to grow production. Oil prices on the margin, and that marginal barrel is becoming MUCH more difficult to source - structurally.

PE-Ethane Spread: $977/MT on the way out this afternoon. +$75/MT today. $LYB, $DOW, $BAK

@LordByrome @Jon_Cocktostan Naphtha certainly the material input. No question there. But we’re talking about a binary bk or no bk. If you take bk off the table, which I’d argue it is for now given this margin boost and no consequential maturities until 2028, then stock likely mis-priced.

@Jon_Cocktostan @MikeyWinter Correct, TQPM is now up and running. But Braskem Idesa is only 10% of the $BAK earnings power, the bulk of the capacity is located in Brazil and runs mostly on naphta sourced from Petrobras.

The chart below overlays $BAK stock price (blue) with the PE-Ethane spread (white). In 2020, the PE-Ethane spread moved from ~$700 to ~$1200 over the course of ~12 months. $BAK stock traded from ~$6.75 to ~$25 over that same period. Since the beginning of the Iran war, the PE-Ethane spread has moved from ~$700 to ~$920. To the extent the war in Iran is protracted (i.e. beyond a few weeks), further expansion of the PE-Ethane spread is likely. We could see $1200 in a matter of weeks given the severity of the supply disruption across the middle east and Asia. $BAK stock price has basically moved ~$1 since the beginning of the war...it moved almost $20 in a year back in 2020 on what will likely be a similar move in margins. $BAK is hanging on by a thread as operations/Mexico have been a mess, but to the extent this move in margins emphatically takes BK risk off the table, the stock is materially mis-priced at $5/sh.

$BAK, $LYB, $DOW, $ASIX The Polyethylene-Ethane spread is of course only one of a variety of commodity spreads that matter to petrochemical producers. Many, run a lot of naptha for instance. But this PE-Ethane spread is a very good indicator of rate of change of profitability, especially for North American producers who can/do run a lot of US Nat Gas derived feedstocks. The second derivative is what moves these cyclical stocks. This is a chart of polyethylene prices over the past 5 years. The market is >25% off the lows on the back of the Iran war. This is an enormously consequential move in price. Polyethylene - $/MT (USD) The chart below is of US ethane prices over the the same period. While the natural gas market is growing increasingly global given the recent scaling of the US LNG export trade, US gas still prices largely as a US/N. American commodity and price volatility has been muted following a hectic winter. Ethane - $/MT (USD) The spread that matters for getting a real-time sense of rate of change of profitability for N. American Pet Chem producers like $BAK, $LYB, etc. is the PE-Ethane spread (yes I know they run a lot of naptha too and have intermediate product exposure as well). We're interested in rate of change of profitability for these names. The PE-Ethane spread is a great indicator. Here is that PE-Ethane spread: PE-Ethane - $/MT (USD) The spread up >$200/tn since late December 2025. Polyethylene prices doing basically all of the heavy lifting. Durability of these margin levels is of course the major question, but if the market continues to suffer from supply constraints (force majeue, etc.) driven by a protracted war in Iran, then these spreads can/will continue to widen and chemical companies can/will re-rate aggressively. Especially a name like $BAK which is currently priced for BK. @calvinfroedge @hkuppy @contrarian8888

Weak retail sales, weak jobs and cooler inflation...all in the same week...got duration?

The response to much lower than expected inflation readings in the coming months will catch many off guard. 10yr treasury yields can trade meaningfully lower in the near-term. $TLT $RKT $LDI $UWMC

@CrusoeAI’s newest factory in Tulsa is up and running and producing electrical switch gear for data centers in the United States. We launched this factory on Crusoe speed - from concept to full scaled operations in less than one year.

Extreme divergence in forward inflation expectations for the US vs. Europe. With Truflation showing US inflation decidedly below 2% (for now), this gap could very well converge in the coming weeks/months giving the Fed more latitude to cuts rates without hurting longer-dated bonds. Small caps and rate sensitive stocks would fly.

1. $BIDU owns 59% of Kunlunxin (private company but IPO likely in 2027) 2. Chinese AI chip maker Moore Threads is valued at 312B yuan = ~$44B 3. Kunlunxin does 3x more revenue than Moore Threads 4. $BIDU's market cap is only $52B. When Kunlunxin's IPO happens the market cap will likely be higher than its parent company Baidu. So I think $BIDU is massively undervalued with a full pivot towards AI. Revenue of Baidu Search could be better but AI product are doing better YoY: -ERNIE Bot (AI chatbot / generative AI assistant) -AI Cloud services (enterprise/public cloud, AI-powered) -Apollo Go (autonomous ride-hailing/robotaxi) & intelligent driving solutions -iQIYI (online video streaming platform)

$IGV Software today reminds me of Energy in late 2014. A lot of denial, but the market action very telling. It's going to be a LONG slog. There were some tradable bounces for Energy along the way, but the secular bear market from 2014-2020 was brutal. The first two years, 2014-2016 in particular felt like one long string of red days, one after another after another. It was enticing to catch the falling knife in energy, but secular wash-outs take a long time... Obviously different structural drivers of the respective bear markets, but the parallels are there. Very difficult to own Software until the AI boogeyman narrative resolves either way.