Special Report on the Industrial Gases Industry: Learning from Linde Gas—Broad Growth Potential in the Industrial Gases Sector

Linde Gas and Hangyang Co., Ltd. exhibit strong business comparability, with industrial gas operations accounting for the highest share of revenue for both companies. In 2022, industrial gas revenue accounted for 86% of Linde Gas’s total revenue and 63% for Hangyang. There remains a substantial gap between the two companies’ industrial gas revenues: Linde Gas generated $28.7 billion (approximately RMB 206.1 billion) in industrial gas revenue in 2022—26 times that of Hangyang; its equipment business revenue was $2.8 billion (approximately RMB 19.8 billion), four times Hangyang’s equipment revenue. Industrial gas revenue growth has been the fastest, and Hangyang has recently demonstrated stronger growth momentum than Linde Gas. From 2019 to 2022, the compound annual growth rates (CAGRs) of equipment business revenue were 0% for Linde Gas and 11% for Hangyang; CAGRs of industrial gas revenue were 7% and 20%, respectively. Hangyang’s CAGRs for equipment and industrial gas revenue thus outpaced Linde Gas’s by 11 percentage points (ppts) and 13 ppts, respectively. In 2022, Linde Gas’s gross margin (excluding depreciation and amortization) stood at approximately 29%, slightly higher than Hangyang’s 25%—a difference of 4 ppts. Linde Gas’s net profit margin was 13% in 2022, also slightly above Hangyang’s 10%—a difference of 3 ppts. Revenue breakdown: Price is the primary driver behind gross margin expansion. From 2018 to 2022, volume, price, cost pass-through, exchange rate fluctuations, and M&A contributed, on average per year, +2 ppts, +3 ppts, +2 ppts, −1 ppt, and +22 ppts, respectively, to revenue growth. 2.2 Management Capability and Operational Efficiency Linde Gas’s selling, general, and administrative (SG&A) expense ratio exceeds Hangyang’s. In 2022, Linde Gas’s SG&A expenses accounted for 9% of sales revenue, whereas Hangyang’s combined selling expenses, administrative expenses, and taxes and surcharges amounted to 8% of revenue. Linde Gas’s financial expense ratio is marginally lower than Hangyang’s: 0.2% versus 0.6% in 2022. R&D investment intensity in the industrial gases industry is generally low; Hangyang’s R&D expense ratio far exceeds Linde Gas’s. In 2022, Linde Gas’s R&D expenditure totaled USD 143 million (approx. RMB 1.027 billion), while Hangyang spent RMB 463 million. Linde Gas’s R&D expense ratio was 0.4%, compared to Hangyang’s 3.6%. Linde Gas’s industrial gas revenue share exceeds Hangyang’s, resulting in somewhat differing operational efficiencies between the two firms. • Linde Gas demonstrates superior inventory turnover: 10.5 in 2022 versus Hangyang’s 2.8. • Linde Gas’s accounts receivable turnover lags Hangyang’s: 6.0 versus 8.4 in 2022. • Linde Gas’s fixed asset turnover is lower than Hangyang’s: 1.4 versus 2.2 in 2022.

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TD Waterhouse Canada Inc. Reduces Stake in Linde PLC

1 day ago

TD Waterhouse Canada Inc. reduced its stake in Linde PLC by 12.1% this quarter, although the company reported strong quarterly earnings exceeding estimates. Analysts maintain a consensus Buy rating as Linde pursues growth in hydrogen infrastructure and carbon capture.

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