Chevron's (CVX) capacity expansion at its Geismar facility in Louisiana is Underappreciated due to weak renewable diesel and biodiesel margins in 2025, UBS Securities said Monday in a report.

The Environmental Protection Agency's revised Renewable Volume Obligations mandate a sharp increase in biomass-based diesel blending, which UBS said should drive a "very strong inflection" in earnings cash flow from 2026 to 2028. Chevron is expected to generate $440 million in incremental EBITDA over that period, the report said.

Chevron's joint venture with Bunge Global (BG) expanded soybean-processing capacity and added switch capability, giving the company direct exposure to soy and softseed crush margins, UBS said.

Diesel and crush margins are likely to be materially higher in 2026, contributing an incremental $1 billion to Chevron's cash flows, the report said.

UBS reiterated its buy rating on Chevron stock with a price target of $218.

Chevron shares fell 2.6% in Tuesday trading, and Bunge rose 0.2%.

Price: 186.72, Change: -5.06, Percent Change: -2.64