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Huntsman (NYSE:HUN) and LyondellBasell (NYSE:LYB) may be risky picks given their volatility, but they also are significantly trading below intrinsic value. According to T1 Banker, the Street rates shares of the former a "hold" versus a "strong buy" for the latter. Based on my review of the fundamentals and multiples analysis, I find stellar upside for both firms.

From a multiples perspective, both firms are cheap. Lyondell trades at a respective 11.5x and 7.6x past and forward earnings, with a dividend yield of 2.3%. Huntsman trades at a respective 13.5x and 5.7x past and forward earnings, with a dividend yield of 3%.

At the fourth-quarter earnings call, Huntsman's management noted a challenging environment:

"Adjusted EBITDA for our Polyurethanes division for the fourth quarter of 2010 was $79 million. Sales volume for our MDI products increased 6% in 2011 compared to the prior year, supporting our assumption that MDI will continue to grow at a multiple of underlying GDP. Demand slowed in the fourth quarter as we saw customers' slow purchases, consistent with seasonality and accentuated by customer de-stocking throughout the value chain. The primary challenge for this business right now is improving its MDI contribution margins. Price increases have been announced for the first quarter, which will partially offset the increased cost of benzene. We expect additional price increases in the first half of 2012 will expand margins".

Despite this outlook, the bar has been set low for the firm. Huntsman modestly beat expectations with EPS of $0.44, a 267% rise from a year ago. Revenue further gained 9% to $2.6B. I am optimistic about pricing increases offsetting input volatility as greater construction activity emerges.

Consensus estimates for Huntsman's EPS forecast that it will grow by 6.5% to $1.80 in 2012 and then by 17.8% and 22.6% in the following two years. Assuming a multiple of 11x and a conservative 2013 EPS of $2.08, the rough intrinsic value of the stock is $22.88, implying staggering 69.9% upside.

Lyondell notably struggled in the fourth quarter. EPS came out to a disappointing $0.41, which was nearly half of consensus. Olefin & Polyolefin and Refining & Oxyfuels fell a respective 12% and 27% sequentially. A surge in the WTI index cut into the purchasing power of crude. With that said, the long-term story is still bright. Petroleum prices are attractive relative to natural gas, which will keep margins up. Ethane costs are further estimated by around 40% for the rest of the year.

Consensus estimates for Lyondell's EPS forecast that it will grow by 2.8% to $4.84 in 2012, and then by 17.1% and 18.3% in the following two years. Assuming a multiple of 11x and a conservative 2013 EPS of $5.53, the rough intrinsic value of the stock is $60.83, implying 43.1% upside.

Source: Staggering Double-Digit Gains Ahead For Huntsman, Lyondell

Additional disclosure: The distributor of this research report is not a licensed investment adviser or broker dealer. Investors are cautioned to perform their own due diligence. We seek business relationships with all of the firms in our coverage, but research covered in this note is independent and prospectively commissioned. Always discuss investments with a licensed professional before making any financial decision. Statements made within this report may include “forward-looking statements” as stipulated under Section 27A of the Securities Act of 1933, Section 21E of the Securities Act of 1934, and the Private Securities Litigation Reform Act of 1995. Since these statements are uncertain, actual results may be materially different from those expected.