Morningstar | Strong Growth in Electronics and Healthcare Fuels Another Solid Quarter for Air Liquide; Raising FVE. See Updated Analyst Note from 26 Apr 2019
We bump our fair value estimate for Air Liquide to EUR 111 from EUR 109 after the narrow-moat industrial gas supplier delivered another solid quarter, growing sales 9% year over year (5% on a comparable basis), with all segments contributing. The key drivers of our fair value adjustment are a slightly more optimistic revenue forecast for full-year 2019 and time value of money since our last update.Air Liquide continued its solid momentum, growing revenue in all geographies and end markets. The Asia-Pacific region showed no signs of slowdown, as sales increased 13% from the same prior-year period, fueled by robust performance in electronics and strong industrial merchant growth in China. Sales in the Americas and Europe were up 2.4% and 2.8% year over year, respectively.
Of note was the firm’s impressive performance in the electronics and healthcare end markets, which delivered year-over-year sales growth of roughly 14% and 5%, respectively. Air Liquide is a leader in providing gases to the electronics and healthcare sectors, and we expect that its economic moat will allow the firm to continue capitalizing on fast growth in these segments. Electronics projects accounted for three of the seven new unit startups in the first quarter, and we expect Air Liquide to continue investing in new electronics projects in Asia.
Air Liquide’s subsidiary Airgas completed the acquisition of Tech Air, which we think will help further build out its distribution network in the U.S. Additionally, Air Liquide announced the acquisitions of Swiss-based home healthcare companies Sleep & Health SA and Megamed AG in the first quarter of 2019, and we expect that management will continue to pursue similar bolt-on acquisitions to further bolster its already strong healthcare portfolio.
L'Air Liquide is engaged in the market of gases for industry, health and the environment. Oxygen, nitrogen, hydrogen, and rare gases make up Co.'s core activities. Co. structures its activities in three segments: Gas and Services, Engineering and Technology, and Other activities. The Gas and Services segment comprises four business lines: Industrial Merchant, Large Industries, Healthcare and Electronics; Engineering and Technology designs, develops and builds industrial gas production plants for Co. and third parties; and the Other Activities segment develops welding and cutting edge technologies, and markets deep-sea diving and swimming equipment to professionals and privates individuals.
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