Materials
APD has underperformed closest peer Linde by over 100% since the two companies hit their Mar 20 lows. The initial underperformance came on the back of compressing EBITDA margins driven by natural gas pass throughs at APD - something that has reversed itself since 4Q22. The recent underperformance has been driven by investors feeling jittery about the capital allocation strategy at the company and associated IRR concerns as well as rising debt and dwindling FCF levels. Hassan Ahmed’s analysis suggests these concerns are being addressed and the share price underperformance should reverse itself. His 12-month TP is $375.
Materials
Recent underperformance and valuation multiple compression vs. Linde are overdone - APD has underperformed the German gas major by a whopping 82% since the two companies hit their Mar 2020 low. Hassan Ahmed points to APD’s attractive end-markets and favourable geographic exposure vs. peers. He also argues that higher exposure to the hydrogen economy and growth projects aren't being fully appreciated. The company has a slew of growth projects coming online over the next five years, which, based on Hassan's calculations, should add >$38 per share to valuation. Finally, APD hasn’t really put a dent in its balance sheet, suggesting ample room for future ventures.
Materials
Recent underperformance and valuation multiple compression vs. peers is overdone - APD has underperformed Air Liquide and Linde by 23% and 81% since hitting March 2020 lows. However, Hassan Ahmed’s analysis shows APD’s margins are turning a corner; it has the most attractive geographic exposure in the current global macro environment amongst the industrial gas majors (US & Asia > Europe); and its higher exposure to the hydrogen economy is not fully appreciated. Last, but not least, the company has a slew of growth projects coming online over the next five years which should add $36+ per share to valuation. 12-month TP $305 (30% upside).
