Luberef: Competitively advantaged base oil producer offering growth + dividends

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Luberef: Competitively advantaged base oil producer offering growth + dividends

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Luberef

Competitively advantaged base oil

producer offering growth + dividends

Initiating Coverage: BUY | PO: 154.00 SAR | Price: 128.90 SAR

Initiating at Buy with SAR154 PO, c20% potential upside 19 May 2026

We initiate on Luberef, the Saudi-based base oil producer, with a Buy rating. Three key Equity

drivers of our rating: 1) we view 2025 crack margins of US$510/tonne as the floor, and

expect them to rise to US$590/MT in 2026E/2027E; 2) we forecast c30% volume Abhishek Kumar >> Research Analyst

growth driven by capacity expansion, supporting a c80% increase in EBITDA in 2025- Merrill Lynch (DIFC)

27E; and 3) we estimate a dividend yield of c6% in 2027E, supported by rising free cash +971abhishek.kumar29@bofa.com4 425 8227

flows and a strong balance sheet. The stock currently trades at 11x EV/EBITDA and 14x Sashank Lanka >>

PE – c10% below its historical average. With earnings set to double in 2025-27E, we Research Analyst

Merrill Lynch (DIFC)

believe valuation is attractive. +971 4 425 8231

sashank.lanka@bofa.com

Base oil margin to rise to US$590/tonne in 2026E/2027E

We expect Luberef’s base oil crack margins to rise to US$590/tonne in 2026E and

remain at this level in 2027E (see- Exhibit 2) from US$510/MT in 2025 aided by 1)

Stock Dataongoing supply disruption due to refinery outage, and production of Group III base oils

from 2027 at Luberef, which carry 20% higher margin and 2) weaker HSFO crack Price 128.90 SAR

margins (see-Exhibit 4), thereby reducing input costs. With elevated diesel crack Price Objective 154.00 SAR

margins, we expect refineries will continue to prioritize diesel over base oil production Date Established 19-May-2026