We came across a bullish thesis on LyondellBasell Industries N.V. on DeepValue Capital’s Substack. In this article, we will summarize the bulls’ thesis on LYB. LyondellBasell Industries N.V.’s share was trading at $62.88 as of July 28th. LYB’s trailing and forward P/E were 21.76 and 16.45 respectively according to Yahoo Finance.
A factory worker monitoring a conveyor belt of specialty chemicals being produced.
LyondellBasell (LYB), one of the world’s largest plastics and chemicals producers, operates at the heart of the hydrocarbon-to-plastics value chain, converting oil and gas derivatives into core building blocks like ethylene and propylene, which are polymerized into polyethylene (PE) and polypropylene (PP). These polyolefins account for over 45% of revenue and drive LYB’s earnings power, with profitability highly sensitive to spreads between product prices and feedstock costs.
The company’s U.S. operations benefit from advantaged ethane-based feedstocks, making LYB the lowest-cost large-cap producer globally. Recent performance has been weighed down by trough-level polyethylene pricing, but signs of a cyclical inflection are emerging as PE and PP prices have posted their first consecutive monthly gains in over a year, operating rates are rising, and inventories are normalizing. Macroeconomic tailwinds, including accelerating China stimulus and a bottoming U.S. PMI, support a potential restocking cycle heading into 2026, positioning LYB as a high-leverage beneficiary.
Financial quality remains intact with a 10-year median ROIC above 20%, a near-9% dividend yield, a disciplined 70–80% FCF payout policy, and a strong balance sheet. Management has shifted toward disciplined growth with projects like the Flex‑2 propylene unit and MoReTec recycling facility, while keeping capex modest. Shares have fallen over 40% from 2024 highs, pricing in a prolonged downturn. A return to mid-cycle margins and selective growth could expand FCF margins to 12% and lift fair value toward $274, implying ~394% total returns over five years, with LYB offering a compelling combination of scale, structural cost advantage, and early-cycle upside.
Previously we covered a bullish thesis on Eastman Chemical Company (EMN) by Necessary-Damage5658 in November 2024, which highlighted its opportunity to gain market share as export controls favor compliant suppliers. The company’s stock price has depreciated approximately by 24% since our coverage because the thesis didn’t play out amid weaker demand. DeepValue Capital shares a similar but emphasizes LYB’s advantaged feedstocks and early-cycle leverage.
