Linde India's Stock Hits Record High Before Profit-Booking Sets In

Shares of Linde India Ltd. touched an all-time high, but reversed all their gains on account of profit-booking.

The stock of the industrial gas company rose as much as 7.23% but pared the gains to trade 1.35% lower around 1:20 p.m. on Thursday. It has rallied 44.37% so far this month compared with the S&P BSE Sensex’s 18.4% advance. The relative strength index is at 93, indicating that the scrip may be ‘overbought’.

Linde India on Aug. 2 agreed to acquire Vadodara-based HPS Gases Ltd.’s packaged gases business, along with certain distribution assets with effect from Nov. 1, for Rs 27.5 crore, according to an exchange filing.

As a part of this acquisition, the company will enter into other agreements with HPS Gases such as asset purchase agreement, non-compete agreement; and agreement for product supply and purchase. “In line with these agreements, Linde India will supply liquid products to HPS Gases and purchase gases in packaged and mini bulk from HPS Gases under a long-term contract with them.”

A week later, the company announced its results for the quarter ended June. While its revenue increased 7.2% sequentially to Rs 519.1 crore, net profit tumbled 76% to Rs 72.4 crore as expenses rose.

Linde India on June 24 had held its annual general meeting, highlighting its strong growth prospects and robust order outlook, among others.

Haitong Securities, in its report dated June 28, expressed its confidence on the company.

Key takeaways from the report:

• The company expects to benefit from inflationary trend in steel sector, new tie-ups in healthcare, its leadership in high potential sectors like electronics, solar, refinery and petrochemicals, hydrogen and decarbonization. It aims to increase capex to invest in such profitable opportunities.

• The order backlog in project engineering division remained robust at over Rs 1,230 crore and is expected to be executed by 2022. The outlook is also strong with new orders likely to flow from Asean region and Egypt.

• Synergy benefits from the joint venture between Linde India and Praxair stood at Rs 77.6 crore in 2020, improving Ebitda margin by 590 basis points over the year earlier.

• Synergies were derived from various initiatives such as optimisation of fixed assets, plant operations, distribution and repairs & maintenance. Management highlighted that total benefits are likely to exceed Rs 175 crore.

The Shanghai-based research firm maintained its ‘outperform’ rating on Linde India and raised its price target from Rs 1,923 to Rs 2,007, implying a potential upside of 26%.

Since June, the stock has gained 58.45%. Besides Haitong Securities, Antique Stock Broking, too, suggests a ‘buy’, according to Bloomberg data. The 12-month return potential of the stock implies a downside of 22%.