High dividend, cheap stock, and a billion-euro restructuring. What is the market overlooking?
European chemical giant pays a dividend with a 4.4% yield, sold its automotive coatings division for EUR 7.7 billion, and is supposed to save EUR 2.3 billion annually by the end of the year. Yet it still trades at 18 times adjusted earnings, and free cash flow in 2025 covered only two-thirds of the dividend. Whether the stock is really cheap will be decided by a single thing: whether the savings start boosting profit, or just keep protecting it from decline.
Key points
Valuation: Reported P/E around 8 looks like a fire sale, but it is inflated by a one-off gain of EUR 3.5 billion from the sale of the automotive coatings business. On adjusted earnings, the stock trades at roughly 18 times.
Dividend: Yield of 4.4% on a payout of EUR 2.25 per share. In 2025, free cash flow covered only about two-thirds of the dividend.
Restructuring: Annual savings are supposed to reach EUR 2.3 billion by the end of 2026. Yet EBITDA before special items fell by EUR 1.1 billion between 2023 and 2025.
Cash flow: For full-year 2026, the company expects free cash flow of EUR 1.5 to 2.3 billion. However, in the first half it reported minus EUR 1.6 billion.
Risk: Part of this year's margin improvement came from supply disruptions during the Middle East conflict. How much of it will last cannot yet be reliably estimated.
At today's price, an investor is buying a company that within two years has closed the most energy-intensive lines in Ludwigshafen, cut headcount by roughly 7,000, and reduced net debt to EUR 17.1 billion. Meanwhile, the share price is almost half below its January 2018 peak. The company guarantees a dividend of EUR 2.25 per share until 2028, but free cash flow does not yet reliably cover it.
Depending on which number the investor picks, the same stock appears either a bargain or an expensive name:
Metric (last 12 months) | Value | Implied multiple | What the number distorts |
|---|---|---|---|
Reported earnings per share | EUR 6.64 | P/E 7.8× | One-off gain of EUR 3.5 billion from the sale of automotive coatings |
Adjusted earnings per share | EUR 2.78 | P/E 18.5× | Stripped of special items, closest to operating reality |
Free cash flow | EUR 1.04 billion | P/FCF 42× | Half-year increase in working capital by billions |
2026 free cash flow outlook (midpoint) | EUR 1.9 billion | P/FCF 23× | Assumes a strong second half |
EBITDA before special items | EUR 7.27 billion | EV/EBITDA 8.5× | Includes the geopolitical price wave from Q2 |
So the investor is not buying a cheap stock in the simple sense. They are buying a bet that a smaller BASF without automotive coatings, with a partly separately listed agricultural division and lower fixed costs, will earn significantly more on its capital than today's just under 6%. For the valuation to re-rate, the savings must show up in EBITDA growth, not just in slowing its decline. Is the market overlooking the restructuring potential, or does the current price correctly reflect the long-term lower quality of European chemicals?
BASF: what does an investor own today?
New group structure
In 2024, BASF $BAS.DE split its business into two groups with different roles under its "Winning Ways" strategy:
Core segments (Chemicals, Materials, Industrial Solutions, Nutrition & Care) are connected to integrated production sites of the Verbund type, where waste products from one production serve as raw material for another. Their value lies in economies of scale and interconnection.
Standalone businesses (Surface Technologies, Agricultural Solutions) have a weaker link to the Verbund. BASF wants to manage them separately and, if needed, sell or list them.
As of 30 June 2026, automotive coatings have left the group, so the following figures are already without them.
Segments in the first half of 2026
Segment | Sales | EBITDA before special items | Margin | EBITDA change y/y | Segment cash flow |
|---|---|---|---|---|---|
Chemicals | 6.26 bn | 610 m | 9.7% | +12.0% | -848 m |
Materials | 7.03 bn | 1,303 m | 18.5% | +48.5% | +30 m |
Industrial Solutions | 4.42 bn | 795 m | 18.0% | +19.1% | +46 m |
Nutrition & Care | 3.38 bn | 396 m | 11.7% | -6.9% | -58 m |
Surface Technologies | 5.03 bn | 391 m | 7.8% | +14.2% | +120 m |
Agricultural Solutions | 5.32 bn | 1,550 m | 29.2% | -4.4% | −279 m |
Other | 1.80 bn | -239 m | - | - | - |
Group | 33.23 bn | 4,805 m | 14.5% | +17.5% | - |
Source: BASF, Half-Year Financial Report 2026. Amounts in EUR.
Where the company earns and where the problem is
The segments can be divided into four groups by economic nature:
Group | Segments | Main products and markets | Capital intensity | Characteristics |
|---|---|---|---|---|
Structurally attractive | Agricultural Solutions, specialty part of Industrial Solutions | Herbicides, fungicides, seeds, additives and dispersions | Low to medium | High margins, patent protection, customer stickiness |
European cost disadvantage | Chemicals | Petrochemicals, intermediates | Highest in the group | Gas and energy feed directly into the price, competition from China and the US |
Cyclical | Materials, Nutrition & Care | Isocyanates, polyamides, vitamins, cosmetic ingredients | Medium to high | Margins track the cycle and industry supply |
Leaving or being phased out | Automotive coatings (sold), battery materials, minority stake in Ag | Coatings, cathode materials | - | Sale, investment curtailment or IPO |
Several important things follow from the table:
Agricultural Solutions: is the most profitable part of the group. In 2025 it generated EBITDA of EUR 2.08 billion on sales of EUR 9.59 billion and a margin of 21.7%. The 29% margin in the first half is influenced by seasonality, because farmers buy mainly in spring.
Materials: showed the sharpest improvement, EBITDA rose 48.5% year-on-year. According to BASF, this was mainly due to higher contribution margins, i.e., a cyclical component.
Chemicals: increased EBITDA by 12% thanks to the ramp-up of the Zhanjiang site in China. Yet it consumed EUR 848 million of segment cash flow. This segment currently ties up the most capital and returns it the slowest.
Surface Technologies: benefited in 2025 from one-off compensation for production costs in the ECMS division (autocatalysts and precious metals). That is why the segment's EBITDA grew by 70% to EUR 800 million that year. For 2026, management expected a significant decline, and in the second quarter of 2026 the segment's EBITDA fell 33% year-on-year.