Praxair: A Long-Term Gainer, Starts Plant in Peru - Analyst Blog

Businesses related to industrial gases are one of the most lucrative industries in the world, providing immense growth opportunities. Long-term growth prospects are bright for players in this industry as applications of industrial gases have increased manifold.

Rapid urbanization of emerging nations has increased demand for better infrastructure and mining/manufacturing methods and equipments. Industries like manufacturing, transportation, healthcare, food and beverages, metal fabrication, among others, are on the rise and in turn, act as demand stimulators for the industrial gases industry. Hydrogen is being increasingly used in the refining industry while oxygen has found use in healthcare and nitrogen and carbon dioxide in oil and gas production.

Earnest efforts are being made by players to reap benefits from the booming demand for industrial gases. Praxair Inc. PX, U.S.-based industrial gas producer and supplier, recently announced the start-up of an air separation plant in Pisco, Peru.  

The new air separation plant has a capacity of 270 tons per day and will primarily cater to industrial gas (oxygen) needs of Aceros Arequipa, the largest long steel maker in Peru. This long-term supply contract will further solidify the relation between Praxair and Aceros Arequipa.

Prior to this, in Mar 2014, Praxair started a new air separation plant, with daily production capacity of 1,250 metric tons, for the Steel Authority of India (SAIL). The new plant will supply gaseous oxygen, nitrogen and argon to SAIL's steel-making facility located at Bhilai.  

In 2013, Praxair derived 95% of its total revenue from North America, Europe, South America, and Asia. Among these geographic segments, growth prospects are very bright in China, India and Korea. Volume growth due to plant start-ups in these regions contributed significantly to Praxair's total revenue growth in 2013.

A series of plant start-ups and contract wins across various nations signify the growing preferences among customers for Praxair's world class technology, high quality products and gas supply services. By 2017, the company anticipates revenue to reach $16 billion, including hydrogen sales of $1.7 billion.

Praxair presently has a $38.3 billion market capitalization. The company's share price gained 1.64% on Apr 9 and has yielded a year-to-date return of 19.4%. Earnings are expected to grow 11.6% in the next 5 years.

Other major players in the industrial gas industry include Methanex Corp. MEOH, Celanese Corp. CE and Cabot Corp. CBT. While Methanex holds a Zacks Rank #1 (Strong Buy), Celanese and Cabot carry a Zacks Rank #2 (Buy).