'Stacking' Tailwinds on the Path to Outperformance

Research evidence excerpt

'Stacking' Tailwinds on the Path to Outperformance

next 12-18

months, Qnity’s EBITDA margin profile has multiple paths to grow. 1) Structurally, the ongoing secular

transition continues to skew the overall product mix favorably, as highly value / leading edge products

make up an increasingly larger share of the total revenue, across both segments. 2) Concurrently, the

strong volume gains seen at their customers allow Q to load up their existing and new assets improving

their operating leverage/fixed-cost absorption. 3) Management is also targeting pricing initiatives to

pass through the ongoing logistical and raw material inflation which should help margins. 4) Finally,

management's Transformation plan is expected to deliver ~$100mm in structural EBITDA benefits

beginning 2H27, which should help 2027 margins. Overall, we see upside risk to the 70bps margin

improvement that we are building into our 2027 EBITDA forecasts.

Recent Customer Partnerships Demonstrate Q's Leadership Position: Q's agreements with NVDA and

AAPL underscore the growing role of materials providers working directly with OEMs to improve system-

level performance. We also believe getting a first movers advantage could help drive share gains for Q as

end-customers likely spec in some of the co-developed products and solutions. Management sees these

agreements benefitting both the segments, via accelerating their R&D (2x to 3x simulation modeling

before AI) and bringing proprietary formulations faster to market. Separately, OEMs are also stepping in

to specify materials at an earlier level to solve system-level architecture constraints, which benefits Q's

chemistries going into thermal management, power/signal efficiency etc.