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Feb 11
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LONG
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Citrini
Substack author, Citrini Research
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Solstice Advanced Materials (SOLS US) operates the sole uranium hexafluoride (UF6) conversion facility in the United States (Metropolis Works), representing ~20% of global capacity. The global conversion market is structurally tight due to Russian sanctions and competitors running near capacity. SOLS' legacy contracts, struck at $20/kgU, are rolling off and being replaced at the current spot price of ~$64/kgU, effectively tripling revenue per unit. This repricing will largely occur by 2028/2029, leading to an explosion in AES segment EBITDA margins to 60%. The market is currently undervaluing SOLS' nuclear segment, assigning it a 7.6x EV/EBITDA multiple for 2028, significantly lower than US pure-play enrichment (LEU at 33x) or Cameco's fuel services (14-17x). The guaranteed repricing of legacy contracts, combined with structural demand growth from new reactors, SMRs, and AI-driven nuclear PPAs, provides a clear path to substantial margin expansion and a re-rating of the stock. SOLS is a deeply undervalued monopoly in a critical, supply-constrained "atoms" market, with guaranteed margin expansion from contract repricing and significant upside from a burgeoning nuclear renaissance. A fair valuation of 12-14x EV/EBITDA for the AES segment could imply $95-105 per share, representing substantial upside. Slower-than-expected contract repricing, a significant drop in spot uranium conversion prices, operational issues at the Metropolis plant, new competitive entrants, or a slowdown in global nuclear energy expansion plans. |
Citrini Research
Atoms vs Bits
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