We came across a bullish thesis on Orion S.A. (OEC) on Value Degen’s Substack by Unemployed Value Degen. In this article we will summarize the bulls’ thesis on OEC. Orion S.A. (OEC) share was trading at $16.54 as of Sept 6.

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Orion S.A. (OEC), a Luxembourg-based producer of carbon black, stands as a key player in a vital but often overlooked industry. Carbon black, a byproduct of incomplete combustion, is used in various applications such as tires, paints, inks, polymers, and high-tech batteries. OEC is the market leader in specialty carbon black and the third-largest producer for tires, positioning it well for future growth as the shift to electric vehicles (EVs) drives increased demand.

The recent downturn in OEC's stock price, which fell from $24.50 to $17.15, was driven by a glut of cheap tires from Southeast Asia and consumers trading down in Western markets. Management attributes this surge to inventory clearance before the implementation of expected tariffs in the U.S. and Europe, suggesting a potential medium-term tailwind for OEC. Beyond tires, the company's other segments—coatings and polymers—are experiencing robust demand, and the broader carbon black market could see further boosts from reduced exports by Russian and Belarusian producers due to sanctions.

OEC operates in a cyclical industry, and management anticipates a return to peak demand in 2025 or 2026, driven by market expansion and favorable pricing. At peak, OEC projects an EBITDA of $500 million, a significant increase from the current trailing twelve-month EBITDA of $285 million. Despite headwinds, the company’s market capitalization remains just over $1 billion, reflecting an undervalued status relative to its future earnings potential.

Management's confidence in OEC's prospects is underscored by significant insider stock purchases. The CEO has invested over $3 million, and the CFO $750,000, while the company recently announced a new share buyback program. Although the balance sheet shows $660 million in long-term debt and additional liabilities, OEC's interest expense is manageable against its EBITDA, and capital expenditures are expected to decrease, enhancing free cash flow from 2023 to 2025.

OEC provides both short-term and long-term investment opportunities. For a quick return, management guides for improved performance in Q3 and Q4, which could drive the stock back toward $25—a potential 45% gain within six to twelve months. For longer-term investors, OEC's leadership position, insider buying, share buybacks, and potential growth from the EV market make it a solid hold. While carbon black may not be glamorous, OEC's risk-reward profile offers both stability and upside, appealing to investors seeking steady gains rather than high-risk speculation.