Air Liquide Earnings: Poised to Capitalize on Growing Investment in Clean Hydrogen

We’ve raised our fair value estimate for narrow-moat-rated Air Liquide AI to EUR 150 from EUR 148 following its third-quarter earnings, mostly due to time value of money. Air Liquide grew its third-quarter comparable sales by roughly 2% from the prior-year period. We view the stock as fairly valued at current levels, with shares in 3-star territory.

On a comparable basis, industrial merchant sales increased by 5% year over year, driven by 6.5% higher pricing. Large industries sales declined by 2% due to relatively softer demand as well as customer turnarounds. Electronics sales were down by 5% due to a slowdown in the memory market, which had an adverse impact on specialty and advanced materials, partially offset by growth in carrier gases. Lastly, the healthcare business maintained its strong momentum, delivering 7% year-over-year growth thanks to higher pricing and growth in home healthcare.

Despite an uncertain macroeconomic environment, we remain optimistic about Air Liquide’s long-term prospects. The company reported a record EUR 1.3 billion of investment decisions in the third quarter and the project backlog now stands at EUR 4.2 billion. Major projects announced during the quarter included an over EUR 400 million investment in a 200 MW electrolyzer in Normandy and an over EUR 140 million investment in an air separation unit and pipelines for customers manufacturing electric vehicle battery components in Quebec, Canada. Air Liquide was also selected as a partner in six out of the seven clean hydrogen hubs in the U.S. that were recently approved for funding by the U.S. Department of Energy and will receive up to $7 billion in funding in aggregate. We think these announcements demonstrate that Air Liquide is poised to be one of the main beneficiaries of growing investment in low- and zero-carbon hydrogen, and we expect the firm to continue to capitalize on opportunities related to the energy transition.