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).
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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)
YearYear 1Year 3Year 5Year 7Year 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 Factor0.9480.8520.7650.6870.585
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 & DriversBasic 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.