Nomura Securities Starts LyondellBasell Industries (LYB) at Buy; Sees 34% Upside

Nomura Securities initiates coverage on LyondellBasell Industries (NYSE: LYB) with a Buy rating and a price target of $95.00, suggesting upside of 34%.

Analyst Aleksey Yefremov commented, "We expect that oil vs. gas spread will continue supporting industry-leading cash generation (8.8% 2015E FCF yield) and buybacks. We see oversupply in key petrochemical feedstocks through 2017, keeping LYB at a cost advantage over global peers. In addition, we like the positive optionality of an ethylene cycle, which could add 14-29% to EPS vs. our base case.

The analyst added, "LYB’s U.S. ethylene and derivates (e.g., plastics) business (49% of EBITDA) uses gas-linked feedstocks, such as ethane, while competitors in Asia and Europe use oil-based feedstocks. We expect ethane oversupply to continue
supporting LYB’s global cost position through 2017."

Yefremov added that the ethylene cycle could lift earnings by 14-29% versus the base case and they see buybacks continuing at a pace of 10% through 2016+.

For an analyst ratings summary and ratings history on LyondellBasell Industries click here. For more ratings news on LyondellBasell Industries click here.

Shares of LyondellBasell Industries closed at $70.67 yesterday.

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