CHE.UN: Favourable H2/26 outlook; increasing PT to $20

Research evidence excerpt

CHE.UN: Favourable H2/26 outlook; increasing PT to $20

Unit 0.66 0.69 0.72 0.76

modified their proposal specifically to address the concern. While a Yield 4.0% 4.2% 4.3% 4.6%

rejection would require transitioning away from liquid chlorine production ACFFO/Unit Q1 Q2 Q3 Q4

post-2030, impacting ~$50-90 million of annual EBITDA based on our 2025 0.47A 0.54A 0.62A 0.15A

estimate, we believe the reconsideration has helped to de-risked some of 2026 0.35A 0.45E 0.66E 0.43E

Prev. 0.43E 0.57E 0.36E the uncertainty. EBITDA, Adj

2025 120.0A 138.0A 151.0A 98.0A

Reiterating 2026 guidance; caustic soda pricing in H2/26 could be the 2026 114.0A 124.0E 150.0E 126.0E

swing factor. Caustic soda pricing has been very volatile, with the Northeast Prev. 117.0E 140.0E 128.0E

Asia price (relevant reference price for Chemtrade) at roughly US$332/MT All values in CAD unless otherwise noted.

in February 2026 before spiking to US$445/MT in March and April due to Priced as of prior trading day's market close, EST (unless otherwise noted).

the Iran conflict. Management indicated that increased Chinese production

has recently reduced the price back down to US$350/MT. Management

acknowledged caustic is their single largest forecasting uncertainty and

their guidance reflects a price of ~US$415/MT for 2026, and industry

forecasts (including CMA) are pointing to ~US$200/MT price increases by

2028. Management estimates that every US$50/MT move in the Northeast

Asia caustic index impacts annual EBITDA by ~$13 million.

Management forecasting a stronger H2/26. Management expects a

stronger H2/26 driven by seasonal improvement in Water Solutions (Q3 is

typically the strongest), rolling contract renewals that will recapture higher

input costs over the next 4-6 quarters, and higher forecast caustic pricing.