Linde earnings growth justifies valuation premium, argues UBS

By Sam Boughedda

UBS analysts reiterated a Buy rating and raised the firm’s price target on Linde (NYSE:) to $410 per share from $375 in a note Wednesday, telling investors that they believe the company’s earnings growth and high free cash flow conversion justify a valuation premium.

They stated in a note that the firm sees industrial gas as “one of the most attractive sub-sectors within the chemical industry” due to its defensive business model and energy transition opportunities.

“We forecast the sub-sector to deliver EBIT growth vs a decline across the global Diversified and Specialty sub-sectors,” the analysts wrote.

“Linde estimates that the investment opportunities associated with the US Inflation Reduction Act are ~$30bn, with potential further opportunities when the EU Green Deal Industrial Plan is finalised,” they added.

UBS does not expect a substantial revenue contribution for Linde from decarbonization projects before 2027, but in its upside scenario, they assume that decarbonization revenues “could add 1% to group sales and EBIT, which equates to $30/share in our upside fair value of $500/share.”