Tronox Holdings plc (TROX): A Bull Case Theory

We came across a bullish thesis on Tronox Holdings plc on Value Degen’s Substack’s Substack by Unemployed Value Degen and Athelas Research. In this article, we will summarize the bulls’ thesis on TROX. Tronox Holdings plc's share was trading at $6.91 as of February 5th. TROX’s forward P/E was 21.83 according to Yahoo Finance.

Tronox Holdings plc operates as a vertically integrated manufacturer of TiO2 pigment in North America and internationally. TROX presents a compelling opportunity in the niche chemicals space, producing titanium dioxide, the primary ingredient in white pigment for paint, plastics, paper, cosmetics, and some food additives. The company is vertically integrated, owning six titanium mines across Australia and South Africa, and eight pigment processing plants globally, giving it a cost advantage over peers and positioning it in the first quartile of the global cost curve.

This integration allows TROX to compete effectively with Chinese producers and maintain strong margins despite global competition. Beyond titanium dioxide, the company benefits from zircon and monazite byproducts, the latter containing heavy magnetic rare earth elements like neodymium and praseodymium, adding optionality and exposure to the growing rare earths market. Management is exploring refining monazite further in Western Australia, potentially positioning TROX as a major Western rare earths supplier over the next several years.

Demand for titanium is expected to expand significantly, driven not only by traditional paint and construction markets but also by emerging applications in aerospace, robotics, and drone technology, which could further enhance TROX’s pricing power. While the company carries a substantial debt load of $3.2 billion, with high interest costs in the short term, its historical cash flows demonstrate strong earnings potential during cyclical upswings, and economic indicators suggest a favorable macro backdrop.

TROX’s current valuation remains attractive, with a price-to-sales ratio of 0.42x, leaving significant upside from a medium-term target of $15 and potential for much higher prices if management successfully executes on debt reduction and rare earth expansion plans. Overall, TROX combines cost leadership, growth optionality, and rare earth exposure, offering investors an appealing risk/reward profile in the global commodity supercycle.

Previously, we covered a bullish thesis on Eastman Chemical Company (EMN) by Necessary-Damage5658 in November 2024, which highlighted its role as a compliant chemical supplier benefiting from export restrictions and strong earnings. EMN’s stock price has depreciated by approximately 24.73% since our coverage. Unemployed Value Degen and Athelas Research share a similar perspective but emphasize Tronox Holdings’ (TROX) vertical integration, rare earth exposure, and niche chemical positioning.

Tronox Holdings plc is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held TROX at the end of the third quarter which was 28 in the previous quarter. While we acknowledge the risk and potential of TROX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TROX and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.