LyondellBasell Industries N.V.LYBNYSE
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DCF Valuation
DCF Valuation Summary
Strong Buy
Fair Value: $175.28 per share(market-calibrated)
+210.8%
Upside to Fair Value
Current
$56.40
Pure Model
$191.95
Fair Value
$175.28
Bull Case
$220.11
Bear Case
$173.95
Market Reality Check
Model Terminal Growth
2.25%
Market-Implied Growth
0.50%
Calibrated Growth
1.64%
Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $191.95.
What's Driving This Ratingfor LYB
↓
CapEx normalizing toward maintenance
Historical CapEx is 6.03% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$732M in annual FCF. This is the biggest driver of long-term cash flow improvement.
↑
Margin expansion modeled
Current EBIT margin is 7.58% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $4.3B (11.86% margin).
→
Moderate revenue growth
Analyst consensus projects -2.33% revenue growth, fading to 2.25% by Year 10. Revenue reaches $36.0B (vs $30.2B today).
🎯
Market pricing in lower growth than model
The market implies only 0.50% perpetual growth — 175bps below the model's 2.25%. This suggests the market sees headwinds or risks not in the model.
→
Moderate cash flow conversion
Year 10 FCF/EBITDA conversion is 59.75% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)0.71
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)7.68%
Cost of Debt
Pre-tax Cost of Debt2.85%
Tax Rate21.00%
After-tax Cost of Debt2.25%
Equity Weight (E/V)53.22%
Debt Weight (D/V)46.78%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (53.22% × 7.68%) + (46.78% × 2.25%)
= 5.50%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
| Year | Year 1 | Year 3 | Year 5 | Year 7 | Year 10 |
|---|---|---|---|---|---|
| Revenue | $29.5B | $30.6B | $32.2B | $33.7B | $36.0B |
| EBIT | $2.2B | $2.3B | $3.1B | $3.6B | $4.3B |
| Tax | $469M | $488M | $644M | $762M | $896M |
| NOPAT | $1.8B | $1.8B | $2.4B | $2.9B | $3.4B |
| + Depreciation | $1.4B | $1.4B | $1.5B | $1.6B | $1.7B |
| - Capex | $1.8B | $1.7B | $1.7B | $1.6B | $1.4B |
| - Δ NWC | -$58M | $80M | $58M | $61M | $65M |
| Free Cash Flow | $1.4B | $1.5B | $2.2B | $2.8B | $3.6B |
| Discount Factor | 0.948 | 0.852 | 0.765 | 0.687 | 0.585 |
| Present Value | $1.4B | $1.3B | $1.7B | $1.9B | $2.1B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$3.6B
Terminal Growth Rate2.25%
WACC5.50%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$112.1B
PV of Terminal Value$65.6B
Exit Multiple Method
Year 10 EBITDA$6.0B
Exit Multiple (EV/EBITDA)14.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$83.5B
PV of Terminal Value$48.9B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$17.1B
PV of Terminal Value$65.6B
Enterprise Value$82.7B
(-) Net Debt$12.5B
Equity Value$70.2B
Shares Outstanding322M
Price per Share$217.97
Exit Multiple Method
PV of Projected FCFs$17.1B
PV of Terminal Value$48.9B
Enterprise Value$65.9B
(-) Net Debt$12.5B
Equity Value$53.4B
Shares Outstanding322M
Price per Share$165.93
Pure Model Fair Value
$191.95
Average of perpetuity growth and exit multiple methods (before market calibration)
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 1.25% | 1.75% | 2.25% | 2.75% | 3.25% |
|---|---|---|---|---|---|
| 3.50% | $289.10 | $304.32 | $290.18 | $276.71 | $263.87 |
| 4.50% | $211.76 | $232.59 | $262.68 | $276.71 | $263.87 |
| 5.50% | $167.21 | $177.93 | $191.95 | $211.07 | $238.69 |
| 6.50% | $137.15 | $143.45 | $151.22 | $161.07 | $173.95 |
| 7.50% | $114.95 | $118.97 | $123.75 | $129.53 | $136.68 |
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$173.95
208.4% vs current
- • -25% vs analyst consensus
- • Terminal growth: 2.0%
- • Beta: 0.88
Base Case
$191.95
240.3% vs current
- • Analyst consensus
- • Terminal growth: 2.3%
- • Beta: 0.71
Bull Case
$220.11
290.3% vs current
- • +25% vs analyst consensus
- • Terminal growth: 2.8%
- • Beta: 0.60
Key Assumptions & Drivers• Basic Materials Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth-2.33%
Year 3 Revenue Growth3.31%
Year 5 Revenue Growth2.25%
Year 7 Revenue Growth2.25%
Year 10 Revenue Growth2.25%
Terminal Growth Rate2.25%
Margin & Efficiency
Current EBIT Margin7.58%
Terminal EBIT Margin13.00%
Tax Rate21.00%
Historical Capex / Rev6.03%
Terminal Capex / Rev4.00%
NWC / Revenue8.20%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 14x EV/EBITDA (Basic Materials sector)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.