LyondellBasell Industries N.V. (LYB) stock intrinsic value fair value estimate & owner earnings analysis

LyondellBasell is one of the world's largest makers of plastics resins (polyethylene and polypropylene), basic chemicals (ethylene, propylene) and propylene oxide and its derivatives, and it licenses polyolefin technology and sells catalysts. It is a commodity-cycle business: profits swing widely with the spread between raw material costs and product prices, and the shares are valued here on what the business earns across a full cycle, not on any single year. How we measure earnings. We start from operating cash flow, strip out the swing in receivables, inventories and payables, subtract stock compensation as a real cost, and subtract only the maintenance portion of capital spending (spending on plant that is needed to stand still, not growth projects, estimated from how much capex has historically accompanied revenue growth). On that basis, per-share owner earnings over the last ten years were: 2016 $7.62, 2017 $11.27, 2018 $8.97, 2019 $6.32, 2020 $3.27, 2021 $22.98, 2022 $12.05, 2023 $9.36, 2024 $5.71 and 2025 a loss of $1.77. Note that 2025 operating cash flow of $2.26 billion included roughly $0.9 billion of cash released from working capital under the company's cash improvement plan; we remove that, and it is why 2025 turns negative. Also, $235 million of 2024 federal tax payments were deferred into 2025 under Hurricane Beryl relief, which made 2025 look somewhat worse than 2024 by timing alone. We did not adjust for this. Why $6.32 is the earnings base. We used the median of 2019 to 2025 (seven years, spanning the 2020 trough, the 2021-2022 boom and the 2023-2025 downturn) which is $6.32 per share. We did not use the 2016-2018 years because the company has since sold its ethylene oxide and derivatives business (2024, $689 million), is closing its Houston refinery and is selling select European olefins and polyolefins plants. We also did not lift the base for the 2021 windfall (which the median largely ignores) or use trailing twelve months. Where things stand now. Owner earnings fell every year from 2022 to 2025, the 10-K describes a continuing downturn, and in February 2026 the quarterly dividend was cut to $0.69 from $1.37. Total debt was $12.9 billion at the end of 2025 against $3.4 billion of cash. We follow the rule of not subtracting debt from value, because cash interest is already deducted in operating cash flow, and we do not add the cash on top either; the debt burden is reflected in the bear case. Against that, the first half of 2026 shows a sharp improvement: operating cash flow before working-capital changes was about $2.0 billion versus about $0.4 billion in the first half of 2025, and capital spending was $539 million versus $1,022 million. Part of that improvement is deferred spending, and receivables rose by $1.7 billion, so we credit only two quarters as a signal for the near-term path, not for the earnings level. Growth-path reconciliation. Owner earnings growth in the last full year (2025) was strongly negative (from $5.71 to a loss of $1.77). Our base case assumes $4.00 in 2026, above that trailing figure, because the first half of 2026 already produced roughly $1.4 billion of owner earnings on the same definition (about $4.25 per share for six months), the company reports capital-spending deferral and a further $500 million of cash savings targeted for 2026, and the 2025 trough included $393 million of tax payments and a working-capital release we already strip out. $4.00 is below the first-half pace. Base case: about $67 per share. Owner earnings of $4.00 in 2026, $5.20 in 2027, then a return to the $6.32 normal level from 2028 for the rest of the decade. Returning to a level the business has already reached is not treated as growth, and no growth beyond it is credited: no share gains, new-product benefit, margin expansion or acquisitions. That includes the MoReTec chemical recycling plant in Wesseling, which is unproven at commercial scale. After 2035 we fade earnings linearly to zero over twenty years, because the plants keep running on maintenance spending (already deducted) but nothing specific guarantees the spreads persist beyond that. Bear case: about $22 per share. The downturn lasts, with owner earnings of $1.00 in 2026 and $2.00 in 2027, settling at $2.50 (below even the 2020 pandemic-year $3.27) through 2035 and fading to zero over the following ten years. This is built from named risks: three straight years of falling operating cash flow, the 2025 loss, the sizeable debt load of $12.9 billion with new notes issued in 2025 at coupons of 5.125% to 6.15%, and the dividend cut. We did not assume a default; the company has an undrawn $3.75 billion revolver. Bull case: about $90 per share. Owner earnings return quickly to a level typical of the stronger pre-boom years, $5.00 in 2026, $7.00 in 2027 and $8.50 from 2028 (near the 2018 level of $8.97 and the ten-year median of $8.30), with the same twenty-year fade. This rests only on the business reaching levels it has already produced, not on a new boom like 2021. How the number is uncertain. The main open items are the effect of the European asset sale (expected to close in the second quarter of 2026 and covering about 25% of the segment's capacity), which our earnings history includes and we have not stripped out; and whether the first-half 2026 improvement reflects lasting spreads or a temporary price rise. If the sale removes earnings power that was positive, base is too high; if those plants were a drag, it is too low. We tested the base by noting that annual results in the 2023-2025 period were all below the median, which is why the base starts from a discount to the median for two years. Margin-of-safety price. Given the cyclical, leveraged nature of the business and a bear case near $22, the margin-of-safety price is about $30 per share, roughly 55% below the base value, to allow for a slower recovery.