DOW: Downgrading to Sector Perform on Waning Price, Growing Alberta Cash Draw

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DOW: Downgrading to Sector Perform on Waning Price, Growing Alberta Cash Draw

Dow Inc.

Target/Upside/Downside Scenarios Investment summary

• PE pricing has been driven by industry oversupply;Dow Inc.

recent disruptions in Iran appear only temporary. While

70 125 Weeks 07FEB24 - 30JUN26 underlying demand in NA has remained stable, some

60 weakness has persisted in Europe. Recent Middle East

50 conflicts have lowered global supply and disrupted

feedstocks to NEA (DOW saw ~15% offline in early March

40 2026), although disruptions appear temporary, and no real

30 TARGETTARGET 28.0028.00

CURRENTCURRENT 27.3627.36 structural supply shifts have resulted from the conflict.

20 Demand weakness (esp. in Europe/Asia) are resulting in

10 softening export volumes (a previously growing outlet for

150m US domestic supply) and lower pricing is likely to persist into

100m

50m 2027.

2024 2025 2026 F M A M J J A S O N D J F M A M J J A S O N D J F M A M J • DOW is driving ~$1.6B in cost reductions. Positively, DOW's

DOW US Rel. S&P 500 COMPOSITE MA 40 weeks ~$1B cost reduction plan delivered ~$400M in 2025, and

Source: Bloomberg and RBC Capital Markets estimates for Target DOW believes it should see an additional ~$500M in 2026.

Valuation Additionally, DOW should see a ~$100M uplift from its Berry

We value DOW by applying a 6.0x EV/EBITDA multiple to our closure, and it believes its Transform to Outperform strategy

2026E EBITDA of $5.3B to arrive at a price target of $28. should deliver an additional ~$500M of run-rate benefits, ~

Our 2026E EBITDA reflects slight PE margin improvement in $1.1B of which we expect DOW to realize by year-end 2026.

Q2, but falling in Q3-4 back toward Q1 levels. Historically, • The Alberta Project remains a significant Capex