REX

Analyst Note: REX American Resources Corporation

Date: 2026-06-20 Current Price: $43.84

1. Structural Readiness

State: Context-only Conservative Entry: Not yet defined (awaiting breakout confirmation) Aggressive/Pre-Breakout Entry: N/A (Structure is forming; entry is conditional on breakout) Breakout Level: Not yet defined (Pending price action above the forming range) Extension: — ATR Current: 4.0% (Productive / High)

2. Thesis Layer

Thesis Status: TACTICAL / SETUP-LED Macro Thesis: None named at this date.

This is a tactical, setup-led name. There is no named secular macro thesis driving the immediate setup. The conviction must be derived strictly from the quality of the structural setup (the forming coil) and the underlying business fundamentals as reported by management. We do not invent a thesis; we judge the name on the strength of the evidence provided in the earnings transcripts and SEC filings relative to the current price action.

3. Business Overview

Company: REX American Resources Corporation Industry: Industrials (Ethanol Production & Carbon Capture) Business Model: REX operates as a producer of ethanol and a developer of carbon capture and sequestration projects. The company generates revenue through the sale of ethanol, dry distillers grain (DDG), and production tax credits (specifically the 45Z credit).

Key Operational Evidence (as of June 20, 2026):

• Expansion Progress: Management confirmed in the May 28, 2026 earnings transcript that the ethanol facility expansion at Gibson City is "on schedule" with completion expected by the end of 2026.
• Capital Allocation: As of Q1 2026, total investment in carbon capture and ethanol expansion projects stood at approximately $176 million. Management stated they are operating within a combined project budget range of $220 million to $230 million, subject to inflation adjustments.
• Production & Volumes: Q1 2026 ethanol sales volumes reached 71.1 million gallons, up from 70.9 million gallons in Q1 2025. Dry distillers grain sales were 155,000 tons at an average price of $155.86 per ton, a significant increase from the prior year's $145.65.
• Regulatory & Permitting:
• The Illinois moratorium on carbon pipeline permitting is scheduled to expire on July 1, 2026.
• Management expects the EPA to prepare a draft permit by July 2026 and make a final decision by November 2026.
• REX received a construction permit to increase ethanol production capacity from 150 million gallons to 175 million gallons per year.
• Tax Credits: The company recorded an additional $7.5 million in production tax credits in Q1 2026. Management is booking credits at $0.10 per gallon at consolidated plants while monitoring 45Z regulations.
• Export Environment: Domestic demand is stable, and export markets remain strong. Ethanol exports to March 2026 increased by 20% year-over-year. The U.S. exported an estimated 2.2 billion gallons of ethanol in 2025.

4. Archetype and Conviction

Archetype: Margin Inflector Rationale: The name fits the "Margin Inflector" archetype due to the convergence of volume growth (ethanol and DDG), pricing power (DDG prices up ~7% YoY), and the monetization of regulatory tailwinds (45Z tax credits and carbon capture permits). The business is transitioning from a pure-play ethanol producer to a carbon-integrated energy company, which management expects to expand margins through the Gibson City expansion and the One Earth sequestration projects.

Conviction Stack:

• Thesis Strength: Moderate. The thesis is tactical and relies on the successful execution of the expansion and the regulatory timeline (EPA permits, Illinois moratorium expiration).
• Evidence Quality: High. The evidence base is robust, with multiple primary sources (earnings transcripts and SEC filings) confirming project timelines, budget adherence, and volume growth.
• Setup Readiness: Partial. The setup is not yet confirmed. The price is holding above support, but the breakout has not fired.
• Rerating Potential: Moderate to High. If the EPA permits are secured by November 2026 and the Illinois moratorium expires as scheduled, the company could unlock significant value from its carbon capture assets, potentially leading to a multiple expansion.

5. Invalidations, Strengths, and Gaps

What Would Strengthen the Case:

• Breakout Confirmation: A daily close above the forming coil's resistance level, confirming the "confirmed" state.
• Permit Finalization: Receipt of the final EPA Class VI permit decision ahead of the November 2026 expectation.
• Budget Adherence: Confirmation that the $220–$230 million budget is not exceeded despite inflation pressures.

What Would Invalidate the Case:

• Regulatory Delay: A significant delay in the EPA permit process or the Illinois moratorium extension beyond July 1, 2026.
• Budget Overrun: Management guidance indicating the project costs have exceeded the $230 million cap significantly.

Gaps in Evidence:

• Q2 2026 Financials: The most recent financial data is from Q1 2026 (ended April 30, 2026). Q2 results are not yet available as of June 20, 2026.
• Carbon Capture Revenue Realization: While the project is funded, the specific revenue contribution from the carbon capture/sequestration side is not yet quantified in the provided evidence, as the project is still in the construction/permitting phase.

PRIVATE ANALYST CALL Judgment: Speculative Confidence: medium Key evidence: Gibson City expansion on schedule for end-2026 completion; Q1 ethanol volumes up to 71.1M gallons and DDG prices up 7% YoY; EPA draft permit expected July 2026 with final decision by November 2026. Key risks: Illinois carbon pipeline moratorium expiration timing; potential budget overrun on $220-230M capex; delay in final EPA Class VI permit decision; lack of confirmed breakout price level. Sizing hint: Position size should be conservative given the "forming" state; scale in only upon confirmed breakout above resistance. Expected path: Price consolidates near current levels while management executes the Gibson City expansion and navigates the EPA permit timeline; potential for volatility spike upon permit finalization or breakout confirmation. Expected horizon: 3 to 6 months (aligned with EPA permit decision timeline and Q2/Q3 2026 execution).