Stock Analysis & Valuation Westlake Chemical Partners LP (WLKP)

• Previous Close: $21.46
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	50.80	137
Intrinsic value (DCF)	33.84	58
Graham-Dodd Method		n/a
Graham Formula	6.61	-69

Strategic Investment Analysis

Company Overview

Westlake Chemical Partners LP (NYSE: WLKP) is a leading master limited partnership (MLP) specializing in ethylene production and related petrochemical assets in the United States. Headquartered in Houston, Texas, the company operates ethylene production facilities that primarily convert ethane into ethylene, a critical feedstock for plastics, packaging, and industrial applications. WLKP also sells co-products such as propylene, crude butadiene, pyrolysis gasoline, and hydrogen to third parties under spot or contract agreements. As a subsidiary of Westlake Corporation (NYSE: WLK), WLKP benefits from integrated supply chain advantages and stable cash flows, making it a key player in the basic materials sector. With a focus on operational efficiency and strategic asset development, WLKP serves a vital role in the petrochemical industry, catering to growing demand for ethylene derivatives in manufacturing and consumer goods.

Investment Summary

Westlake Chemical Partners LP (WLKP) offers investors exposure to the stable cash flows of ethylene production, supported by long-term supply agreements with its parent company, Westlake Corporation. The partnership's high dividend yield (~7.5%) and low beta (0.795) suggest defensive characteristics, appealing to income-focused investors. However, risks include commodity price volatility, reliance on Westlake Corporation for revenue (via offtake agreements), and exposure to regulatory changes in the petrochemical sector. WLKP's moderate debt levels ($399.7M) and strong operating cash flow ($485M in FY 2023) provide financial stability, but growth prospects are limited due to its MLP structure and dependence on fixed-fee contracts. Investors should weigh its income-generating potential against sector cyclicality.

Competitive Analysis

Westlake Chemical Partners LP (WLKP) holds a niche position in the ethylene production market, leveraging its relationship with Westlake Corporation for feedstock supply and offtake agreements. Its competitive advantage lies in cost-efficient ethane cracking operations and stable cash flows from long-term contracts. However, WLKP lacks diversification compared to larger integrated peers like Dow Inc. (DOW) or LyondellBasell (LYB), which operate across multiple petrochemical segments. WLKP’s smaller scale limits its ability to compete on innovation or global expansion, but its MLP structure provides tax advantages and high distribution yields, appealing to income investors. The company’s reliance on Westlake Corporation for nearly all revenue reduces commercial risk but also constrains growth opportunities. Competitors with broader portfolios can better withstand ethylene price fluctuations, whereas WLKP’s performance is tightly linked to its parent company’s utilization rates. Its competitive positioning is thus best suited for investors seeking steady dividends rather than aggressive growth.

Major Competitors

• Dow Inc. (DOW): Dow Inc. (DOW) is a global leader in diversified chemicals, including ethylene production, with a vast manufacturing footprint and R&D capabilities. Its scale and vertical integration give it cost advantages over WLKP, but its broader exposure to industrial demand cycles increases volatility. Unlike WLKP, Dow’s dividend yield is lower (~5%), but it offers growth via innovation in sustainable materials.
• LyondellBasell Industries (LYB): LyondellBasell (LYB) is one of the largest ethylene producers globally, with advanced cracking technology and a strong presence in international markets. Its diversified product slate and economies of scale outperform WLKP’s regional focus, but LYB’s higher debt load and exposure to European energy costs pose risks. LYB also pays a competitive dividend (~5.2%).
• Celanese Corporation (CE): Celanese (CE) specializes in acetyl and ethylene-derived products, with a focus on high-margin specialty chemicals. Its engineered materials segment provides diversification WLKP lacks, but CE’s smaller ethylene production capacity makes it less of a direct competitor. CE’s growth in high-performance polymers contrasts with WLKP’s steady-but-limited model.
• Westlake Corporation (WLK): Westlake Corporation (WLK), WLKP’s parent, operates upstream (feedstock) and downstream (finished products) assets, giving it integrated advantages. WLK’s broader business reduces reliance on ethylene margins, unlike WLKP. However, WLKP’s MLP structure offers tax benefits and higher yields, appealing to different investor profiles.