Rising RIN prices amplify SRE value: Goldman is bullish on DK and bearish on CVI

Overview

This report discusses the divergent performance of U.S. refining companies against a backdrop of rising RIN prices. Goldman believes that after the EPA raised its 2026/2027 renewable volume obligation (RVO) targets, the RIN market became tighter, and compliance costs will pressure refining capture rates and cash flow, but small refinery exemptions (SREs) could materially alter the impact on individual stocks. The core conclusion of the report is to buy Delek US Holdings (DK) and sell CVR Energy Inc. (CVI).

Core views

DK is viewed as the more favorable beneficiary because its asset portfolio may qualify for up to 100% SRE, and the 2025 exemption decision could become an important catalyst. If a full exemption is granted, cash inflows could exceed 40% of DK's market cap and support share repurchases. In contrast, CVI has greater exposure to high RIN costs, and the SRE potential at the Wynnewood refinery can only provide partial relief; if the exemption does not materialize, cash flow and capital allocation will remain under pressure.

Analysis framework

The report starts from RVO targets, the RIN supply-demand balance, refining compliance costs, and SRE scenarios, comparing DK and CVI's cash flow sensitivity in a high-RIN-price environment, and uses a valuation framework primarily based on SOTP with M&A value as a supplement for target prices.

Methodology notes

• Valuation methodsSOTP + M&A target price framework

  The target price consists of 85% SOTP and 15% M&A value.

  The 6-month target prices for both DK and CVI use an 85% SOTP weighting and a 15% M&A weighting; the M&A value assumes a $1/bbl increase in crack spreads, consistent with Goldman's broader coverage methodology.

• Scenario analysisSRE/RVO cash flow scenarios

  Assess refiners' compliance costs and cash flow impact through SRE exemption rates and RIN prices.

  The report focuses on the potential impact on DK's value realization from the final 2025 SRE decision, historical RIN litigation from 2019-2022, and 2024 Krotz Springs refinery SRE eligibility.

• Relative ratingGoldman Sachs rating framework

  Buy, Neutral, and Sell are based on a stock's total return potential relative to the coverage universe.

  The report assigns Buy to DK and Sell to CVI, reflecting the difference in relative risk-reward between the two companies under high RIN prices and potential SRE outcomes.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Delek US Holdings (DK)

  A potential SRE beneficiary in a high-RIN-price environment.

  Strengths

  May obtain up to 100% SRE; cash inflows could be substantial under a 2025 full exemption scenario; management is also advancing 2019-2022 RIN-related matters and awaiting the 2024 Krotz Springs refinery SRE decision.

  Weaknesses

  Value realization depends on the EPA's final decision and related litigation progress; if exemptions are below expectations, cash flow improvement will be limited.

  Comparison

  Compared with CVI, DK is viewed in the report as the stock more likely to benefit from SRE value realization.

  Risks

  Refining margins, operational execution, capital allocation, delayed EPA decisions, or insufficient exemption magnitude.

• CVR Energy Inc. (CVI)

  The main stock under pressure from high RIN costs.

  Strengths

  The Wynnewood refinery has potential SRE-related cushioning.

  Weaknesses

  Highly exposed to RIN costs, and the company has not met full RVO compliance, making cash flow and capital allocation vulnerable to SRE outcomes.

  Comparison

  Compared with DK, CVI has less favorable risk-reward under high RIN prices, so the report maintains a Sell rating.

  Risks

  Persistently high RIN prices, failure of SRE approval to materialize, pressure on refining capture rates, and constrained capital returns.

Key data

• Report date2026-06-23 5:35PM EDTDisclosure time shown on the cover.
• RIN price driverEPA finalized 2026/2027 RVO targetsThe report states that higher renewable volume obligations led to a significant rise in RIN prices.
• DK 2025 initial RVO cost$468mnThe report states that the potential value of a full SRE could exceed twice this initial cost.
• DK potential cash inflowMore than 40% of market capEstimated based on current RIN prices and a 2025 full SRE scenario.
• DK target price$586-month target price, based on 85% SOTP and 15% M&A value.
• CVI target price$316-month target price, based on 85% SOTP and 15% M&A value.
• Disclosed pricesDK $43.41；CVI $27.20From the company-specific regulatory disclosure section.

Impact & implications

Higher RIN prices raise compliance costs for refining companies and may compress capture rates and cash flow. From an investment perspective, SRE eligibility and exemption magnitude become key variables distinguishing stock performance: if DK obtains a large exemption, it could unlock significant cash flow and strengthen repurchase capacity; if CVI cannot obtain sufficient exemptions, capital returns and cash flow generation face downside risk.

Risks

• Volatility in refining margins could affect target prices and cash flow for DK and CVI.
• Weaker-than-expected operational execution could reduce refinery earnings and cash flow generation.
• Capital allocation or capital returns below expectations could affect investor returns.
• There is uncertainty around the timing and exemption magnitude of the EPA's final 2025 SRE decision.
• Related RIN litigation from 2019-2022 could take years, and historical RINs may not be monetizable in the short term.
• If the RIN market sees a significant supply response, the path of prices and compliance costs could change.

What to watch

• The EPA's final decision on the 2025 SRE.
• Whether DK obtains close to 100% of the 2025 SRE and its subsequent share repurchase plans.
• The monetizability of historical RIN litigation from 2019-2022 and "zombie" RINs.
• The EPA's decision on DK's 2024 Krotz Springs refinery SRE eligibility.
• The SRE outcome for CVI's Wynnewood refinery and the extent to which it can buffer the RVO compliance gap.
• Changes in RIN prices, domestic biofuel supply, exports, and imports.