SOLS — FIMCO Equity Research

01 · Business Overview & Revenue Model 10-K FY2025 · Form 10/DRS-A 2025

72% Refrigerants & Applied Solutions ~$2,798M

28% Electronic & Specialty Materials ~$1,088M

Solstice Advanced Materials Inc. was spun off from Honeywell International on October 30, 2025, and commenced regular-way trading on Nasdaq (SOLS) that day. Per the 10-K (FY2025), in 2025 the company served over 3,000 customers across ~120 countries, operated 20 manufacturing sites and 4 R&D centers, and employed approximately 4,100 people. No single customer exceeded 10% of net sales; the top 10 collectively represented less than 20%. Average customer tenure is ~10 years. In 2025, revenue was $3.886B (+3.1% YoY), with 50% of sales from products launched in the past five years.

The RAS segment (~72% of revenue) manufactures LGWP HFO refrigerants, HFC refrigerants, blowing agents, aerosol propellants, cleaning solvents, and high-barrier pharmaceutical packaging (Aclar). It also operates Metropolis Works (Metropolis, IL) — the only operating uranium hexafluoride (UF6) conversion facility in the United States — via ConverDyn, a JV with General Atomics holding an NRC license valid until 2060. Key brands: Solstice, Genetron, Aclar.

The ESM segment (~28% of revenue) produces sputtering targets for semiconductor fabs, Spectra ultra-high-strength fiber for ballistic protection applications (helmets, body armor, naval), and laboratory life science chemicals (Fluka, Hydranal). Geographic mix (Form 10, 2024 data): ~60% United States (including $720M in exports), ~25% EMEA, ~15% Asia-Pacific.

02 · Competitive Moat & Differentiation 10-K FY2025 · Form 10

Patent Fortress — HFO Refrigerants

5,700+ issued patents and pending applications (10-K, Dec 31 2025); RAS alone holds 4,000+. Composition patents on R-1234yf extend into mid-2030s. March 2026: Hudson Technologies licensed R-448A and R-449A HFO blends — demonstrating a royalty-generating IP model is emerging alongside direct manufacturing.

Regulatory Moat — AIM Act & Global Phase-Down

US AIM Act mandates 85% HFC phase-down by 2036. European F-Gas regulations mirror this. Per Form 10, HFOs were 27% of refrigerant sales in 2022 and exceeded 60% in 2025. S&P Global projects 9.2% annual HFO volume growth in North America and 7.8% in Europe through decade-end. Customers cannot avoid switching.

Nuclear Monopoly — Metropolis Works

Only operating UF6 conversion facility in the US. NRC license valid until 2060. Per Feb 2026 8-K, 2026 production target exceeds 10 kilotonnes (~20% expansion from 2024 planned capacity). Backlog exceeds $2B. ConverDyn is exclusive marketing agent. No domestic competition; new entrants face multi-decade capital and regulatory barriers.

Proprietary Process — Spectra & Semiconductor Materials

Gel-spinning process for Spectra UHMWPE fiber protected as trade secret (10-K). Colonial Heights (VA) has served US defense supply chains for 20+ years. Capacity expansion underway. Sputtering target extrusion process is similarly proprietary. Semiconductor customer qualification cycles at leading-edge fabs create multi-year switching costs.

Key moat risk: R-1234yf composition patents expire mid-2030s. Chemours and Asian manufacturers could enter, compressing HFO pricing sharply. Management is developing next-generation refrigerants (10-K), but commercialization timelines relative to patent expiry are uncertain. This is the single most important long-term variable in the thesis.

03 · Key Financials 10-K FY2025 · 10-Q Q3 2025 · 8-K Q4 2025 · Form 10/DRS-A · Live: StockAnalysis Apr 2026

SOLS became a standalone public company October 30, 2025. 2022–2024 annual figures from Form 10/DRS-A combined financial statements. 2021 standalone data not available. Live TTM data sourced April 10, 2026.

Annual P&L — Combined/Standalone ($ millions)

Metric	2021	2022	2023	2024	2025	YoY Δ
Net Sales ($M)	N/A	~$3,310	~$3,570	$3,770	$3,886	+3.1%
Gross Profit ($M)	N/A	~$1,126	~$1,204	$1,306	$1,250	(4.3%)
Gross Margin %	N/A	~34%	~34%	34.6%	32.2%	(240)bps
Operating Income ($M)	N/A	N/A	N/A	~$866	$732	(15.5%)
Operating Margin %	N/A	N/A	N/A	~23%	18.8%	(420)bps
Adj. EBITDA ($M)	N/A	~$1,050	~$1,030	$995	$957	(3.8%)
Adj. EBITDA Margin %	N/A	~32%	~29%	26.4%	24.6%	(180)bps
R&D Expense ($M)	N/A	N/A	N/A	$83	$97	+16.9%
SG&A ($M)	N/A	N/A	N/A	$392	$421	+7.4%
Transaction / Spin Costs ($M)	—	—	—	$26	$117	NM
Income Tax Expense ($M)	N/A	N/A	N/A	$192	$362	+88.5%
Effective Tax Rate	N/A	N/A	N/A	24.1%	55.9%*	NM
Net Income attr. ($M)	N/A	$718	$621	$594	$237	(60.1%)
Diluted EPS ($)	N/A	N/A	N/A	$3.74	$1.49	(60.2%)
CapEx ($M)	N/A	N/A	N/A	$296	$408	+37.8%
Adj. EBITDA – CapEx ($M)	N/A	N/A	N/A	$699	$549	(21.5%)
Total Debt ($M)	N/A	N/A	N/A	—	$2,430	NM
Cash ($M)	N/A	N/A	N/A	$661	$534	(19.2%)

*2025 ETR of 55.9% reflects ~$170M one-time frictional separation taxes (10-K Item 7); not indicative of normalized rate. ~ 2022–2023 estimated from DRS-A combined financials. N/A = not available as standalone pre-spin-off.

Quarterly P&L — 8 Most Recent Quarters ($ millions)

Metric	Q1 '24	Q2 '24	Q3 '24	Q4 '24	Q1 '25	Q2 '25	Q3 '25	Q4 '25
Net Sales ($M)	~$963†	~$987†	$907	$913	~$963†	~$967†	$969	$987
Gross Profit ($M)	~$327†	~$347†	$332	$305	~$337†	~$345†	$310	$258
Gross Margin %	~34%†	~35%†	36.6%	33.4%	~35%†	~36%†	32.0%	26.1%
Adj. EBITDA ($M)	~$253†	~$270†	~$237†	$235	~$245†	~$288†	$235	$189
Adj. EBITDA Mgn	~26%†	~27%†	~26%†	25.8%	~25%†	~30%†	24.2%	19.1%
Net Income attr. ($M)	~$153†	~$156†	$152	$133	~$119†	~$77†	($35)	$41
Diluted EPS ($)	~$0.96†	~$0.98†	$0.96	$0.84	~$0.75†	~$0.49†	($0.22)	$0.26

† Q1/Q2 estimated from 9-month and FY SEC totals. Retrieve exact figures from Q1 8-K (Apr 2025) and Q2 8-K (Jul 2025). Q3 2025 from 10-Q (Nov 2025). Q4 2025 from 8-K earnings release (Feb 11, 2026).

Gross margin at multi-year low (26.1% Q4 2025): Down from 34.6% in 2024. The 10-K attributes this to HFO/HFC mix transition (HFOs carry lower near-term unit margins as volume ramps), $117M in one-time spin-off transaction costs, and Healthcare Packaging under-absorption from customer destocking. Adj. EBITDA margin (24.6%) is the cleaner year-over-year comparison.
Net income distorted by spin-off taxes: 55.9% effective tax rate in 2025 vs 24.1% in 2024 reflects ~$170M incremental separation taxes. Trailing GAAP P/E of 52.5× is not representative. 2026 Adj. EPS guidance of $2.45–$2.75 (implying ~30× forward P/E) is the correct valuation anchor.
CapEx cycle constrains near-term FCF: $408M CapEx in 2025 (+38% YoY), $400–425M guided for 2026 — ~10.5% of revenue. Adj. EBITDA–CapEx fell 21.5% to $549M. This is intentional strategic investment in refrigerant, nuclear, and defense capacity; FCF yield is compressed near-term by design.
Balance sheet manageable: Debt/EBITDA = 2.54× (live data), Net Debt $1.89B, Interest Coverage 26.1× — healthy. Total liquidity ~$1.5B. Debt taken on at spin-off to fund distribution to Honeywell; known, priced-in liability.
Revenue growth modest but real: +3.1% in 2025 (+6% ex-nuclear pull-forward). The thesis rests on margin recovery, volume inflection in HFO/nuclear, and multiple expansion as the market gains confidence in the standalone model — not on hyper-growth in the near term.

04 · Valuation Live data Apr 10, 2026 · 8-K Q4 2025 · Street consensus

Scenario	Revenue	Adj. EBITDA	Adj. EPS	P/E	EV/EBITDA	EV/FCF
FY2025 Actual (standalone)	$3.89B	$957M	$1.49 GAAP	52.5×*	15.0×	~27×
FY2026E — Co. Guidance (midpoint)	$4.00B	$1,000M	$2.60	30.0×	14.3×	~24×
FY2027E — Street Consensus	~$4.30B	~$1,080M	~$3.10	25.2×	13.2×	~20×
FY2028E — Street Consensus	~$4.65B	~$1,175M	~$3.70	21.1×	12.2×	~16×

EV = $12.42B mkt cap + $2.43B debt − $534M cash = $14.31B (live). FCF = Adj. EBITDA − CapEx − ~$100M interest − ~$100M taxes. Street consensus: 4 analysts, avg target $72.75, range $61–$94 (note: avg target is below current price). *Trailing P/E distorted by spin-off taxes.

Bear Case

$52

(33%) vs $78.03

2026 Rev growth~0%

Revenue~$3.90B

Adj. EPS~$2.00

Exit P/E26×

DriverHFO mix worsens; healthcare drag extends; margin stays depressed; de-rates to chemicals peer avg

Base Case

$84

+8% vs $78.03

2026 Rev growth+5%

Revenue~$4.08B

Adj. EPS$2.60

Exit P/E32×

DriverGuidance delivery; margin recovery to 25%+; nuclear backlog builds; in-line with analyst avg target

Bull Case

$120

+54% vs $78.03

2026 Rev growth+8–10%

Revenue~$4.2–4.3B

Adj. EPS~$3.20+

Exit P/E37–40×

DriverHFO acceleration; nuclear re-rating; AI cooling demand; CapEx cycle yields margin expansion

05 · Comparable Companies Analysis Live market data Apr 10, 2026 · StockAnalysis · PitchBook · Company filings

All market data live as of April 10, 2026. P/E trailing excludes companies reporting net losses (NM). Forward multiples based on Street consensus. EV/EBITDA trailing from live data. FCF Yield Fwd. = (Fwd. EBITDA − CapEx − taxes − interest) ÷ Market Cap. Imputed prices use SOLS 2026E Adj. EPS $2.60 for P/E and SOLS TTM EBITDA $953M + live net debt $1,890M for EV/EBITDA.

Company	Ticker	Price	Mkt Cap	EV	P/E Trail.	P/E Fwd.	EV/EBITDA Trail.	EV/EBITDA Fwd.	FCF Yld Fwd.
Chemours Company	CC	$17.57	$2.64B	~$6.5B	NM	12.3×	NM†	8.0×	~11%
DuPont de Nemours	DD	~$70	$28.6B	~$32B	NM	~18×	13.6×	12.0×	5.3%
Entegris	ENTG	~$116	$17.6B	~$21B	75.1×	34.1×	24.2×	18.0×	2.9%
PPG Industries	PPG	$103.82	$23.2B	~$27B	~17×	~15×	11.2×	10.5×	6.0%
Honeywell International	HON	~$200	~$127B	~$145B	32.4×	21.2×	19.4×	16.0×	4.6%

Peer Mean	—	—	—	—	41.3×‡	20.1×	17.1×‡	12.9×	5.96%
Peer Median	—	—	—	—	32.4×‡	18.0×	16.5×‡	12.0×	5.30%

SOLS (Actual — live)	SOLS	$78.03	$12.42B	$14.31B	52.5×*	29.3×	15.0×	14.3×	3.50%
Imputed Price @ Peer Median	—	—	—	—	N/A*	$46.80	$87.14	$63.69	$45.29
Imputed Price @ Peer Mean	—	—	—	—	N/A*	$52.26	$90.75	$69.36	$40.27

% vs Median (to $78.03)	—	—	—	—	N/A*	(40%)	+12%	(18%)	(42%)
% vs Mean (to $78.03)	—	—	—	—	N/A*	(33%)	+16%	(11%)	(48%)

*SOLS trailing P/E (52.5×) excluded from imputed calcs — distorted by ~$170M one-time spin-off tax. Forward P/E imputed = Peer Multiple × 2026E Adj. EPS $2.60. EV/EBITDA trail. imputed: (Peer Multiple × $953M TTM EBITDA) − $1,890M net debt ÷ 158.75M shares. EV/EBITDA fwd. imputed: (Peer × $1,000M 2026E EBITDA) − $1,890M ÷ 158.75M. FCF imputed: ($953M EBITDA − $412M CapEx − $100M interest − $55M taxes) = ~$386M normalized FCF ÷ Peer FCF Yield ÷ 158.75M. ‡ P/E trail. mean/median includes only companies with positive trailing earnings (ENTG, PPG, HON); excludes NM (CC, DD). EV/EBITDA trail. excludes CC (distorted at ~66×, NM in practice). †CC EV/EBITDA trailing excluded (meaningless at current distressed earnings); fwd 8× used instead.

Key takeaway from comps: The only metric where SOLS trades at a significant discount to peers is trailing EV/EBITDA, where the live 15.0× sits 9–12% below peer median/mean — suggesting the market may be paying for future EBITDA improvement rather than trailing results. On forward P/E (29.3× vs median 18.0×), SOLS commands a 63% premium to peers. On FCF yield (3.5% vs 5.3–6.0%), it commands a 35–48% premium. These premiums must be earned through execution on margin recovery and the nuclear/HFO volume inflection.

06 · Key Risks & Scenarios 10-K Risk Factors FY2025

HFO patent cliff (mid-2030s): Composition patents on R-1234yf expire mid-2030s. Chemours and Asian manufacturers could enter, compressing HFO pricing sharply. Management is developing next-generation refrigerants but commercialization is not guaranteed. This is the most material long-term risk — the key reason to monitor new product launch timelines closely.
Gross margin compression persistence: Live gross margin (32.2% TTM) is well below the historical 34–36% range; Q4 2025 hit 26.1%. If the HFO/HFC mix transition is more prolonged than guided, or if Healthcare Packaging destocking extends into 2026, recovery to 25%+ Adj. EBITDA margin may slip — directly pressuring the 30× forward multiple.
CapEx intensity constrains FCF: $400–425M annual CapEx guided for 2026. FCF yield of ~3.5% (live data) sits well below peers (5–11%). If capacity projects underdeliver on returns, the investment cycle creates financial risk and limits shareholder returns capacity.
Spin-off execution risk — limited track record: SOLS has been a public standalone for less than 6 months (live). The 10-K explicitly flags "limited operating history as an independent, publicly traded company." Transition services from Honeywell expire over time; standalone corporate costs may prove higher than modeled.
Nuclear policy and perception risk: The 10-K lists "public and political perceptions of nuclear energy" as a risk. Any safety event at Metropolis Works, reversal of nuclear policy, or funding cuts to uranium conversion infrastructure would impair the $2B+ backlog.
RSI overbought / technical risk: Live RSI of 78.9 (significantly above the 70 overbought threshold) and current price 38% above the 50-day MA ($56.30) indicate elevated near-term mean-reversion risk. A pullback to the $65–70 support zone is the more tactically attractive entry point.

07 · Catalysts

Q1 2026 Earnings (May 6) Hudson HFO Licensing Expansion Nuclear Backlog Announcements AIM Act HFO Adoption Inflection Next-Gen Refrigerant Launch Defense Fiber Capacity Expansion AI/Data Center Cooling Demand

Q1 2026 earnings (May 6, 2026): First clean standalone quarter. Guidance: $935–985M revenue, $235–245M Adj. EBITDA. A beat with gross margin recovery above 30% would confirm the Q4 2025 trough narrative and likely re-rate the stock. A miss — particularly continued margin pressure — would validate structural rather than transitory concerns.
Hudson Technologies HFO licensing (March 2026): SOLS licensed R-448A and R-449A HFO blends to Hudson for supermarket refrigeration. This establishes a royalty-generating IP model. Additional licensing agreements with HVAC OEMs or foreign distributors would signal IP-derived revenues beyond direct manufacturing.
Nuclear capacity and contract expansion: $2B+ UF6 backlog and 20% capacity expansion underway. Additional debottlenecking announcements, new nuclear utility contracts, or SMR-related demand would incrementally extend multi-year revenue visibility.
Next-generation refrigerant commercialization: Products launched in the past five years contributed 50% of 2025 net sales (10-K). Commercialization of post-HFO successor refrigerants is the most significant long-term catalyst — potentially extending the regulatory moat by a decade beyond current patent expiry dates.

08 · Price Technicals & Momentum Live data Apr 10, 2026 · StockAnalysis · Investing.com

RSI 78.9 — significantly overbought on live data: The 14-day RSI of 78.9 (sourced live from StockAnalysis, April 10, 2026) sits well above the conventional 70 overbought threshold. Combined with +7.8% in 7 days and +8.1% in 30 days, the stock is technically extended and vulnerable to mean-reversion on any negative news or broader market weakness.
Price 38% above the 50-day MA ($56.30): The live 50-day moving average of $56.30 is well below current price ($78.03) — a 38% gap that is historically unusual and typically resolves either through price correction or time-based consolidation as the MA catches up. The 200-day MA is not yet available given the stock only began trading in October 2025.
Support ~$65–70 is the tactical entry zone: The $65–70 range represents prior price consolidation during late 2025/early 2026 and corresponds to where multiple analyst price floors converge. A pullback to this zone would represent a meaningfully better risk/reward entry for new long positions.
Short interest low (1.72% of float): Short interest is minimal, meaning there is limited short-covering fuel for a squeeze but also limited hedging pressure. The shareholder base is largely long-only institutions (49.5% institutional ownership) with limited downside protection in the form of active short positions.

09 · Investment Thesis & Recommendation

Solstice Advanced Materials is a structurally advantaged specialty materials company operating at the intersection of three secular growth megatrends: the global regulatory phase-out of HFC refrigerants, the nuclear energy renaissance, and AI-driven semiconductor and data center materials demand. Its competitive advantages — a 5,700+ patent portfolio with composition coverage through the mid-2030s, the only operating US uranium conversion facility with a $2B+ backlog, mission-critical Spectra fiber for defense, and deep semiconductor customer relationships — are genuine and durable.

The live comps analysis tells a nuanced story: SOLS trades at a 16–63% premium to peers on forward P/E and FCF yield, but only a 10–18% discount to peer mean/median on trailing EV/EBITDA — the market appears to be paying for future EBITDA improvement rather than rewarding today's results. That is a reasonable bet if the Q4 2025 gross margin trough (26.1%) is truly transitory and 2026 delivers recovery toward 25%+ EBITDA margin. It is an expensive bet if margin recovery slips.

On live technical data: RSI of 78.9, a 38% premium to the 50-day MA ($56.30), and the stock sitting within 8% of its all-time high create an asymmetric near-term risk/reward. The analyst consensus average target ($72.75) is actually below the current price — a noteworthy signal that even bulls see limited upside from here.

HOLD for existing positions. Accumulate on weakness toward $65–70 for new positions. The BUY trigger is evidence of sustained gross margin recovery above 30% in Q1–Q2 2026 reporting (May 6 and early August 2026 earnings dates), or a nuclear/refrigerant contract announcement extending the long-duration revenue backlog beyond the current $2B figure.