📈 Why Delek (DK) US Could Double as Hidden Assets Come to Light

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Today’s setup? A small-cap refiner with massive hidden value about to be unlocked.

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🧭 Trade Thesis: DK’s Asymmetric Upside from Hidden Assets

Delek US Holdings (NYSE: DK) has quietly positioned itself for a major re-rating. While the market sees a small, volatile refiner, we see a company with two powerful, underappreciated catalysts creating a compelling asymmetric risk/reward setup.

Behind the scenes:

💰 RINs Windfall: Delek has already been granted $374M in Small Refinery Exemptions (SREs), with up to $1.1B in potential recoveries - a massive cash infusion for a company with a $2B market cap.

💧 Permian Water Powerhouse: DK owns 63% of Delek Logistics (DKL), a Permian Basin water management leader. That stake alone is worth nearly 75% of DK’s entire market cap - meaning the refining business is almost free.

📈 Margin Expansion: SRE relief adds $2.50–$3.00/bbl to EBITDA, reshaping DK’s earnings profile in a strong refining market.

📊 The Fundamentals Are Shifting

Let’s break it down:

💰 Revenue (TTM): $10.82B

📐 Adjusted EBITDA (Q2 2025): $170.2M (+58% YoY)

💎 Refining EBITDA: $113.6M (+170% YoY)

🚛 Logistics EBITDA: $120.2M (+19.5% YoY)

💧 Dividend Yield: 3.03% (covered and secure)

📐 Valuation Is Disconnected from Reality

⚖️ EV/Sales: 0.42x vs. Sector Avg. 0.88x (50%+ discount)

🏷️ SOTP Value: $71/share - 111% upside from current price

💎 Undervalued DKL Stake: Market is valuing DK’s DKL ownership at a fraction of its worth, implying the profitable refining business is nearly free.

🧠 Technical Setup: Strong Buy Signal

✅ Up over 200% from 52-week lows

✅ Trading above 20-, 30-, and 50-day moving averages

✅ 11 “Buy” vs. 3 “Sell” signals

✅ Current Price: $DK ( ▲ 5.66% )  

🎯 Targets: $40 (initial), $50+ (intermediate)

💥 Trade of the Week

🟢 Stock Play:

• Buy DK at $34.40

🛡️ Options Play:

• Buy April 17th $40 Calls for $3.50

  • Delta: 0.41

  • Implied Vol: Moderate

  • Breakeven: $43.50

  • Reward: Unlimited upside

  • Max Risk: $3.50 per contract

🛑 Risk Management Tip

Set a stop-loss at $30.00 on the stock - just below the 50-day moving average. This gives the trade room to breathe while protecting against trend breakdowns.

🚀 Catalysts to Watch

1. Q3 Earnings (Nov 7) – Expect continued margin expansion from high crack spreads and SRE benefits.

2. SRE Cash Payments – Market hasn’t priced in the full $600M–$1.1B windfall. Cash flow will enable buybacks.

3. DKL Deconsolidation News – Any spin or separation will highlight SOTP value immediately.

4. Analyst Upgrades – Expect new targets once SRE value is fully modeled in.

🧠 Final Thoughts

DK is a rare find: a deeply undervalued company with multiple, near-term catalysts. The market is asleep at the wheel, focused on the noise while the real value builds under the surface.

✅ Buy DK stock at $34.40
💸 Buy April 17th $40 Calls for $3.50

We’ll be watching this one closely.

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