⚡ Gas giants of the future: who will lead the energy race? 🏁
Company presentation
The four leading players in the global industrial gases market are Linde, Air Liquide, Air Products and Chemicals and Nippon Sanso Holding. Each of these companies has a long history and has developed into a major player over time:
- Linde was founded in Germany in 1879 and is today an undisputed market leader.
- Air Liquide was founded in France in 1902 and ranks second on the world market.
- Air Products and Chemicals was founded in the USA in 1940 and is number three in the market.
- Nippon Sanso Holding has its origins in a company founded in Japan in 1910 and is currently number four in the industry.
Historical development
The industrial gases sector is characterized by remarkable stability. The same companies have dominated the market for over a century, indicating high barriers to market entry and a particularly robust business model. In recent decades, there has been increasing consolidation:
- 2018 saw the merger of $LIN (-0.28%) and Praxair, creating the new industry leader.
- 2016 $AI (-0.01%) Liquide acquired its US competitor Airgas to strengthen its market position
$4091 (-0.19%) Sanso benefited from the mergers of its competitors and was able to expand through strategic acquisitions in Europe and the US.
Business model
The four companies produce and distribute industrial gases such as oxygen, nitrogen and hydrogen, which are indispensable in numerous sectors, from the steel industry to medical technology. The business model is based on long-term customer relationships, technological expertise and highly efficient logistics that enable the gases to be transported and delivered safely and economically.
Core competencies and future prospects
The companies' core competencies lie in the efficient production and distribution of industrial gases and in their in-depth technical expertise. All four companies are increasingly focusing on growth markets such as hydrogen technology and electronic gases, which are seen as key areas for the future. In particular, the growing demand for clean energy sources and the development of new technologies create potential for further growth.
Market position and competition
The global market for industrial gases is dominated by these four companies:
- Linde is the clear market leader.
- Air Liquide follows in second place.
-$APD (+0.11%) ranks third.
- Nippon Sanso is number four on the market.
Together, Linde and Air Liquide control around 63% of the global market share, underlining their supremacy in the industry.
Total Addressable Market (TAM)
The global market for industrial gases is growing continuously and is expected to continue to expand in the coming years. Although exact figures on the "Total Addressable Market" (TAM) are not publicly available, it is estimated that the global market for industrial gases will reach a value of USD 173.43 billion by 2030.
Share performance
The valuation and performance of the shares of these companies show considerable differences:
With a market capitalization of $221.43B, Linde is currently the most valuable of the 4 companies. Since the IPO on June 17, 1992, Linde has returned 10,041% and on a 3-year basis is at 55.72%. Air Liquide is at 44.28% on a three-year basis and at 3,248.2% since the IPO on January 2, 1992, clearly behind Linde. APC is at 5,183.8% since the IPO on January 2, 1990, ahead of Air Liquide but behind Linde. On a 3-year basis it is at 11.07%. Nippon Sanso is at 71% and has only reached 1,311.56% since the IPO on January 6, 1992, making it the worst of the four stocks.
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Conclusion
If I were to focus on just one company, it would be a difficult decision. Therefore, I look at two stocks, but still go through the decision process thoroughly. When I bring together all the relevant information about the industry and my personal priorities, I tend to see Linde as the preferred choice. The industry requires capital and Linde is the best positioned in this respect. In addition, the larger companies clearly benefit from being able to leverage their size effectively with banks and customers. Linde is well positioned in both Europe and America, and recent developments in the US have increased its focus on shareholder return. As an established brand, Linde also offers excellent diversification.
Air Products and Chemicals is also interesting, but has weaknesses compared to Linde in its ties to "heavy industry". Although this can have advantages, it has also brought disadvantages in recent years. I therefore initially considered Air Liquide as a possible favorite. They are strongly positioned in many business areas and have a well-known brand, even if they have a "somewhat" weaker presence in the USA. However, their culture and domicile in Europe is super pronounced, which affects shareholder value a little.
If you want better diversification, which is the case with APC and Air Liquide as they cover different strengths, you should take the two, because you have to remember that Linde shares have only really gained in value in the last four years. Even though I personally would prefer Linde and Air Liquide, I actually think Air Liquide and APC are a better rational choice due to their diversified positioning and stable market position in the areas in which they operate.
And you buy shares for the future development and not the past.
