AIQUF - Linde: Oligopoly Leader, Further Profitability Increase Ahead

2025-02-28 09:14:25 ET

Summary

• Linde plc is the leader in the oligopolistic industrial gases market.
• The on-site nature of the business and a low distribution radius form a natural moat for companies operating in the industrial gases market.
• Purchase Accounting effect from the Linde AG / Praxair merger back in 2018 led to Linde reporting artificially low GAAP earnings.
• Linde's organic growth outlook, coupled with ongoing margin increases and economies of scale, should allow Linde to grow earnings at a rate of at least 8% annually.
• I would add to my position at around 27x Adjusted EPS, implying an entry price of $420 on FY24 earnings or $445 on FY25 earnings.

Introduction

This will be my first article covering Linde plc (NASDAQ: LIN ). I plan to cover LIN regularly in the future (once, maybe twice, per year). LIN is one of my more recent portfolio additions. I bought some shares at the beginning of December 2024 and some more early this year.

LIN's main investment case is the oligopolistic nature of the industrial gas market, coupled with an outstanding management team. LIN seems to be in a position to grow organic revenue in the mid-single digits and EPS in the low teens for the foreseeable future....

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