Solstice Advanced Materials Inc: Feedback and Debates since our upgrade

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Solstice Advanced Materials Inc: Feedback and Debates since our upgrade

ome easier comps in 2Q and 2H for SOLS. Medium term we think

Refrigerants grows at a MSD% rate. SOLS refrigerants are ~50/50 aftermarket/

OEM, and we expect the aftermarket transition for HFOs to start to drive higher

margin/mix over the next few years. OEM mix is larger into auto OEM, stationary

cooling (resi/commercial), and commercial refrigeration. One take from our earlier

NDR was that datacenter cooling materials into chillers is likely a few % of sales,

but growing at a ~50% rate adds 1-2% growth to total SOLS refrigerants sales.

We expect growth to continue and RAS segment margins to start to growth Y/Y in

2H26.

Longer term there are also debates about refrigerant patent expirations in the early

2030s. We do include a placeholder of a $50-60M EBITDA hit in 2030 to account

for some price declines in HFOs into Asia/Latam markets in pure HFO formulations

(auto OEM). We do expect that between now and then there are new refrigerant

blends to further drive down global warming potential (regulatory driven

reductions in supply). As this happens, legacy refrigerant pricing can go up (not in

our model right now, upside risk). And there could be HFOv2 products that would

extend patents and perhaps gain additional share (lower flammability risk, reduced

ability to break down, etc). While we discussed datacenter for chillers above, we

also don't layer in 2-phase coolant materials for datacenters in our sales estimates

either. So this negative EBITDA impact we bake in could be conservative, and

growth/earnings could be higher than we model. See our SOLS initiation for more

details on refrigerants - link.

Background Materials

We also just have a lot of conversations explaining both companies to SOLS, ESI,