100% return in 2 months: Should you invest in this multinational industrial gas firm now?

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A midcap multinational industrial gas firm has been buzzing on Dalal Street due to its superior performance during the past two months. Shares of the company have rallied 100% to Rs 1,801 on April 1, 2021 from Rs 897 on January 27. This stock is Linde India.

The Indian industrial gas market is estimated at Rs 20,000 crore, out of which nearly 40% is captive. Brokerage Antique Stock Broking is positive on Linde India with a price target of Rs 2,170, citing a strong demand outlook from the metallurgy, manufacturing and healthcare sector.

Market analysts also believe that business integration with Praxair India will create sustainable and profitable growth for the company. “Linde India, after business integration with Praxair India, is well poised to register exponential earnings growth over the next 3-5 years, on the back of expected acceleration in demand for industrial gases in India,” Antique Stock Broking said.

The company has a dominant position in the country, with a strong manufacturing base, brand equity and technological prowess. Most ‘high-growth quality MNC engineering companies are trading at a significant premium to the broad market, due to high-quality businesses, growth opportunity and superior management quality.

Antique Stock Broking believes that Linde India falls in a similar category. “We expect EBITDA margin to improve to 29% by CY23, resulting in earnings growing by 2.8x by CY23,” the brokerage said.

Kranthi Bathini, equity strategist, WealthMills Securities said, “As there is a recovery in manufacturing and steel sector, the company has taken the advantage of the cyclical story. Investors can accumulate the stock on dips after the recent rally. The company has strong earnings visibility.”

For the quarter ended December, the company posted a 15% year-on-year growth in consolidated gross sales at Rs 475.43 crore. The figure stood at Rs 412 crore for the corresponding quarter last year. On the other hand, net profit of the company declined 91% YoY to Rs 56 crore.