LyondellBasell Industries N.V. (LYB): A Bear Case Theory

We came across a bearish thesis on LyondellBasell Industries N.V. on Monopolistic Investor’s Substack by Antoni Nabzdyk. In this article, we will summarize the bulls’ thesis on LYB. LyondellBasell Industries N.V.'s share was trading at $48.99 as of November 28th. LYB’s trailing and forward P/E were 104.96 and 12.89 respectively according to Yahoo Finance.

LyondellBasell Industries (LYB) operates as a global chemicals company, producing essential building blocks like ethylene and polyolefins used across consumer goods, packaging, automotive parts, and durable products. While it benefits from scale and low-cost production, the business is highly cyclical and heavily dependent on commodity prices, leaving it with minimal pricing power. Its technology segment, which licenses polymer production methods to roughly 350 facilities worldwide, is the most profitable, generating 50% EBITDA margins and $671 million in 2024 revenue, but this high-margin business is underleveraged relative to the broader operations.

The company’s other segments, including olefins, polyolefins, refining, and innovation & development, have struggled, with negative or low single-digit margins, reflecting the intense price competition and commodity exposure inherent in its operations. Historically, LYB has capitalized on cheap U.S. shale gas and scale advantages, but slowing revenue growth and unprofitable recent quarters underscore the risks of its commodity-driven model. Operationally, LYB faces environmental and reputational pressures, including pollutant releases and rising GHG emissions, while initiatives toward eco-friendly solutions remain limited and unevenly incentivized.

Financially, the balance sheet shows positive equity, but with only $1.81 billion in cash against $13.33 billion in debt, the company has significant leverage relative to liquidity, adding risk to operations. Valuation models, including a zero-growth DCF, suggest some upside, yet the unpredictability of commodity prices, weak pricing power, and structural limitations of its moat make LYB a high-risk proposition. While its technology segment offers a rare bright spot, the broader business remains fundamentally challenged, leaving investors with limited confidence in a sustainable turnaround and signaling a clear “SELL” stance based on its operational and strategic profile.

Previously we covered a bullish thesis on Eastman Chemical Company (EMN) by Necessary-Damage5658 in November 2024, which highlighted the company’s advantage from export control changes and its strong compliance with civilian applications. The company's stock price has depreciated approximately by 38.58% since our coverage. This is because the thesis didn’t play out. Antoni Nabzdyk shares a contrarian view but emphasizes LYB’s exposure to commodity cyclicality and weak pricing power.

LyondellBasell Industries N.V. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held LYB at the end of the second quarter which was 38 in the previous quarter. While we acknowledge the potential of LYB as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.