LYB — LyondellBasell
TL;DR
LyondellBasell is a global polyolefins and refining company — the largest producer of polypropylene compounds globally and a major PE producer. The Iran conflict is the single biggest earnings windfall for LYB among the three petchem names: FY26 EBITDA nearly doubles vs. prior estimates. BofA nonetheless rates the stock Underperform at 68 PO — the conflict tailwind is temporary, ~1 year of overearning appears priced in, and the post-conflict base case is a return to global oversupply.1
Business
LyondellBasell operates across Olefins & Polyolefins (Americas and Europe/Asia), Intermediates & Derivatives (propylene oxide, oxyfuels), Refining, and a growing Technology licensing segment. LYB is highly leveraged to PE and PP price-cost spreads, with feedstock costs varying by region (NGL in North America, naphtha in Europe). The company generates strong free cash flow at cycle peaks and has a history of aggressive buybacks and dividends.1
Thesis
- Biggest near-term beneficiary, but also the most cyclically exposed. BofA’s FY26 EBITDA estimate of 2,546mn — the largest percentage uplift of the three names. The same leverage works in reverse when prices normalize.1
- ~1 year of overearning priced into current shares. At 68 PO, BofA calculates excess market cap / excess EBITDA at 3.6 quarters (~1.0 year) of peak earnings implied. More conservative than DOW’s 1.7 years, but still unfavorable risk-reward.1
- Conflict resolution → return to oversupply. Global PE utilization was in the high-60s to low-70s% before the disruption. China continues to add capacity; BofA does not expect the structural closures (~2mn tonnes) needed to permanently tighten markets.1
- 2026 pricing peaks mid-year, then fades. BofA models a +35cpp US PE increase through Q2 2026, with contract prices declining in H2 2026 and further into 2027. Year-end 2026 pricing stays above January levels but the trend is decisively lower.1
- 2027–2028 are the normalized earnings anchor. BofA’s $68 PO is based on 6.0x FY26 EBITDA, also consistent with ~6.5x on 2028 EBITDA — treating 2026 as a cyclical peak, not the run rate.1
Risks
- Upside: Stronger-than-expected global PE demand; higher crude oil prices boosting product prices while US NGL stays cheap; faster conflict resolution with some structural capacity loss; LYB-specific margin improvement in European operations as trade dislocations correct.1
- Downside: Lower oil prices compress product prices; higher US natural gas and NGL feedstock costs squeeze spreads; weaker global economic growth reduces PE demand; fast post-conflict normalization accelerates pricing decline before contracts reset lower.1
Recent catalysts
- 2026-04-06 — BofA downgrades LYB to Underperform from Neutral; raises PO to 55; raises FY26 EBITDA to 532mn. LYB identified as the biggest near-term beneficiary of market dislocations among BofA’s covered petchem universe.1
Second-order reads
- 2026-04-06 — BofA US Chemicals note — US PE contract-to-spot export spread now at ~8.65cpp; wide differential likely difficult to hold as dislocations normalize. Implication for LYB: near-term earnings beats likely but contract repricing risk builds through H2 2026.1
Valuation & positioning
| Metric | Value |
|---|---|
| Price (2026-04-05) | $76.50 |
| BofA Price Objective | $68 |
| Rating | Underperform |
| BofA valuation basis | 6.0x FY26E EV/EBITDA (≈ 6.5x FY28E) |
| FY26E EBITDA | $5,080mn |
| FY27E EBITDA | $4,165mn |
| FY28E EBITDA | $4,311mn |
| FY26E EPS | $9.12 |
| FY27E EPS | $6.16 |
| FY28E EPS | $6.50 |
| Mkt cap | ~$24,710mn |
| Excess mkt cap / excess EBITDA | 3.6 quarters |
| Implied overearning duration | ~1.0 year |
The 6.0x multiple is a discount to LYB’s historical averages; BofA treats 2026 as a cyclical peak and anchors to 2027–2028 normalized estimates. The PO is also roughly consistent with a 6.5x multiple on 2028 EBITDA.1