Valhi: the Kronos shares alone are worth the whole company, the rest comes free, and the verdict is hold at $14.55

At the November 5 close Valhi's entire market value was about $416 million. The 57.6 million Kronos shares Valhi holds directly were worth about $407 million on the same day. Buy Valhi and the market hands you, roughly for free, 83% of NLI Holdings with its own 35.2 million Kronos shares, most of CompX, $116 million of notes from the City of Henderson and a pile of cash. The question is why, and whether the reason ever goes away.

At $14.55, Valhi trades 37.9% below my Base value of $23.45. The Bear value is $7.79, 46.5% below the price, and the Bull value is $48.08, 230.4% above it. I assign no probabilities to the cases. The verdict is Hold, with new money waiting for $13.48 or less.

Valuation route: a holding company. I value Valhi's economic share of each business (Kronos directly and through NLI, CompX through NLI, NLI's own cash and liabilities, the Henderson real estate and Valhi's other cash), subtract capitalized group overhead, and then apply a holding discount for a minority, illiquid share in a controlled group. Kronos is valued on normalized EBITDA, CompX on operating profit. The same sum at today's market prices is the cross-check. Values are present fair-value estimates, not 12-month price targets.

What Valhi is

Valhi is the middle layer of a family-controlled group. Contran, controlled by Lisa Simmons and a family trust, owns about 91% of Valhi. Valhi owns about 50% of Kronos Worldwide directly and about 83% of NLI Holdings (formerly NL Industries). NLI owns about 31% of Kronos and 87% of CompX. Valhi also controls the real estate companies BMI and LandWell in Henderson, Nevada, and Tall Pines, a captive insurer.

The latest results

Kronos is the story. After cost cuts at the end of 2025, it gained market share in Europe and North America helped by anti-dumping duties, raised prices 11% during the first nine months, and turned a third-quarter loss into a $57.9 million operating profit. It expects full-year sales and volumes above 2025, better margins and higher average prices in the fourth quarter. It also warned that some idled European competitors have restarted production and that demand is still below historical levels, especially in North America. Kronos shares fell 8.7% on November 5, before the results came out.

Which numbers to trust

• Valhi's net income mixes in other people's money. About a fifth of Kronos and of NLI, and 13% of CompX, belong to outside shareholders, and the tax line moves with one-offs such as this quarter's $12.1 million deferred tax benefit.
• Real estate profit is ending. LandWell has sold all its saleable land in Henderson. What remains is collecting the $170 million of approved infrastructure reimbursements, $116.1 million of which was still owed as notes at the end of 2025, over the next five to seven years.
• Overhead is large for a holding company. Group general expenses were $24.6 million in nine months, and the companies paid Contran $42.6 million in service fees across the group in 2025.
• Kronos debt sits below Valhi. Valhi itself owed only $7.6 million to Contran at June 30. The real leverage is Kronos's €426 million of 9.5% notes due 2029.

Primary valuation: look-through value with a holding discount

In the Base, Kronos earns normal EBITDA of $230 million, valued at 6.5 times. After $500 million of net debt and its pension deficit after tax, that is $8.18 per Kronos share, 15.8% above its November 5 close. CompX is valued at 15 times its after-tax operating profit of about $30 million plus its $57.3 million of cash. The sum, less ten years of group overhead, is $36.07 a Valhi share. A 35% holding discount brings the Base value to $23.45.

• Why $230 million for Kronos: the first nine months of 2026 produced roughly $160 million of EBITDA on my estimate, with prices still recovering. $230 million assumes a normal year at today's lower cost base, not a peak.
• Why 6.5 times: titanium dioxide is a cyclical commodity with Chinese competition, and Kronos carries 9.5% debt.
• Why a 35% holding discount: Contran controls 91% of the votes, the shares trade a few thousand a day, cash moves around the group through related-party loans, and the dividend returns a small fraction of the underlying earnings. The discount is on top of the capitalized overhead.
• Real estate and other cash: these are my estimates from the latest balance sheets; together they are about 10% of the look-through value.

Kronos's normal earnings and the holding discount decide almost everything:

Cross-check: the same sum at market prices

Replacing my Kronos and CompX values with their November 5 closing prices ($7.065 and $36.62) and keeping everything else the same gives a look-through value of $34.13 a share, before any holding discount. At $14.55 the market applies a 57.4% discount to it. Even valuing NLI at its own depressed share price instead of looking through it, Valhi's stakes are worth about $25.69 a share, 43.4% above the price.

Valuation triangulation

• Primary (look-through with a 35% discount, Base): $23.45. This is the central value.
• Look-through at market prices, before any discount: $34.13.
• Stakes at Kronos's and NLI's own share prices: $25.69.
• Nearby assumptions (Kronos EBITDA $200 to $260 million, discount 30% to 40%): $18.56 to $28.85.

What is the market already pricing in?

The price works only if Kronos's normal earnings are below what it is already earning in 2026, or if minority holders should expect to capture less than half of what they own. The second is the more plausible explanation, and it can last for a very long time.

Bear, base and bull scenarios

• Bear: the titanium dioxide recovery fades as idled European capacity returns, Kronos's debt takes most of its value, CompX is valued at 12 times, overhead is higher and the market keeps a 55% discount.
• Base: as described above.
• Bull: Kronos holds share gains and price increases, CompX is valued at 18 times, and a simplification of the group, for example a buyout of minorities, narrows the discount to 20%.

How the buy price is set

Confidence is C, which carries a default margin of safety of 42.5%. I add nothing to it, because the holding discount and overhead are already in the value. That gives a maximum buy price of $13.48.

With Kronos EBITDA between $200 and $260 million and a discount between 30% and 40%, the same margin gives buy prices from $10.67 to $16.59. The price of $14.55 sits inside that range, so the decision depends on the assumptions; on my central ones it is just above the buy zone. The 52-week range is $11.44 to $19.19.

The dividend is $0.08 a quarter, a 2.2% yield, declared again on November 5.

Reasons to own Valhi

• The price is roughly covered by one asset, the direct Kronos stake, at a Kronos price that has just fallen 8.7%.
• Kronos is in a recovery: volumes up 14% and prices up 5% year on year in the third quarter, with higher prices expected in the fourth.
• CompX is a steady, cash-rich business, and NLI holds $57 million of its own cash.
• Valhi itself has almost no debt.
• The group has a history of restructuring ownership among related companies, which could one day narrow the discount.

What could go wrong?

• Control. Contran decides dividends, loans, deals and any buyout price. A take-private could happen at a price close to today's discounted market price.
• Titanium dioxide cycle. Kronos depends on pricing; restarted European capacity and Chinese exports could reverse this year's gains.
• Kronos debt. The 9.5% notes and a Contran loan mature in 2029, and Kronos has to refinance at whatever rates exist then.
• Legacy liabilities. NLI faces lead pigment litigation and environmental claims, and expects higher litigation costs in the fourth quarter.
• Pledged shares. 16.7 million of Valhi's Kronos shares are pledged as collateral for Contran's own debt.

Management execution

• Kronos's 2025 restructuring has worked: margins and market share are up this year.
• CompX has grown sales and operating income in 2026.
• LandWell turned Henderson land into cash and approved reimbursement notes as planned.
• Service fees to Contran and related-party lending are large relative to what minority holders receive.
• Capital allocation favors the controlling family's group structure over closing the discount.

On my ten-point management check (two points each), Valhi scores 8 of 20: credit for operating execution at Kronos and CompX, little for governance and returns to minority shareholders.

Stock Analyza scorecard

The valuation score is 70 of 100.

Valhi owns cyclical and niche businesses inside a structure built for its controlling shareholder. Business quality and valuation are shown separately and are not averaged.

Confidence score

The grade measures how well the model is identified, not the chance of a loss.

What I would watch from here

Kronos's fourth-quarter prices should come in above the third quarter's, as it expects, and its 2027 order book should hold up as European competitors restart. At Valhi, the signals are dividends, buybacks or any change in the group's structure.

The three most important thesis breakers

1. Contran buys out the minority at a small premium to today's price, which locks in the discount for good.
2. The titanium dioxide recovery reverses and Kronos's debt absorbs its value, which leads toward the Bear.
3. The group simplifies or Valhi returns more cash, and the holding discount narrows, which leads toward the Bull.

Stress test and independent check

I recomputed every scenario with a separate script that sums the per-share pieces directly, and the results match to the cent. That checks the arithmetic, not the forecasts.

The weakest point is the holding discount, because every 10 points move the value by about $3.60 a share, and nothing forces it to narrow. The strongest bull argument is that the price is covered by one listed stake. The strongest bear argument is that a minority holder only ever receives what Contran chooses to pay out.

Final verdict: hold at $14.55

Valhi trades at a very large discount to the businesses it owns, and the reason for that discount is just as clear. The businesses underneath are recovering, but the shareholder at the top decides who benefits.

Verdict: HOLD at $14.55, watchlist for new money. Base $23.45, 61.2% above the price, Bear $7.79, Bull $48.08, look-through at market prices $34.13, Confidence C (15/25). Required margin of safety 42.5%, maximum buy price $13.48, range $10.67 to $16.59 under nearby assumptions.

New money buys only at or below $13.48. For an existing holder the original cost is irrelevant: the Base is well above the price, but the gap closes only on the controlling shareholder's timetable. At Valhi you can buy the assets at a discount; you cannot buy a say in when they are worth full price.

Sources

Primary sources are Valhi's third quarter 2026 results release and dividend notice (November 5, 2026), the Forms 10-Q of Kronos Worldwide and NLI Holdings for the third quarter of 2026 (November 5, 2026), Valhi's Form 10-K for 2025 and its Form 10-Q for the second quarter of 2026. All were accessed through Bigdata.com, and the companies' filings are available on SEC EDGAR.

The reference market price is $14.55, the last regular-session trade on November 5, 2026, and the closing prices of Kronos, NLI Holdings and CompX and the 52-week range come from market data via Bigdata.com.