(News Bulletin 247) – The bank switched to buying on the value this Wednesday, raising its advice by two notches. Jefferies believes that the industrial gas specialist’s price increases are sustainable and that its valuation is attractive.

A flagship value for small investors (34% of its capital is held by individual investors), Air Liquide is currently outperforming the CAC 40 over the whole of 2024. The industrial gas specialist has gained 1% since January 1 , when the Parisian index dropped 4.7% over the same period.

The best is perhaps yet to come for Air Liquide. At least that’s what Jefferies seems to think, which made a 180-degree turnaround on the stock this Wednesday. The bank went from “underperformance”, equivalent to “sell”, to “buy” on the stock, while increasing its price target to 190 euros against 151 euros previously. At Tuesday’s closing price, this target gives the stock a potential of nearly 20%.

This increase in advice brings Air Liquide up 1.2% on the Paris Stock Exchange around 3 p.m., signing the strongest increase in the CAC 40.

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Prices that hold up well

Jefferies explains that its previous negative opinion was linked to expectations of lower volumes at Air Liquide than at its competitors, led by the American-German Linde.

To a certain extent this has been true. Since 2020, the French group has underperformed Linde in terms of volumes in the “merchant industrial” segment, i.e. smaller industrial customers than those in “large industry (metallurgy, chemicals, refining). ), more energy intensive.

However, Jefferies notes that a relative improvement, compared to chemists specializing in consumer products (such as the Swiss DSM-Firmenich and Givaudan), has been observed since the start of the year.

Above all, the bank emphasizes that Air Liquide managed to increase prices, despite low volumes. Certainly, the company has passed on the impact of increases in gas prices, rising sharply in 2022, to its customers. But even excluding this effect, the impact of prices was positive and lasting, according to the bank, as evidenced by the improvement in Air Liquide’s margins.

To the extent that the market for industrial gas producers has consolidated, with three players now sharing 80% of the market share, “we believe that this pricing power should be maintained throughout the forecast period , because the structure and discipline of the sector remain strong,” writes the establishment.

This continued increase in prices, coupled with cost reduction initiatives should enable Air Liquide to improve its operating margin. Jefferies expects it to be 21.7% in 2026 compared to 20.2% in 2024.

A discount destined to be absorbed

The financial intermediary notes in passing that the profitability gap with Linde has not significantly reduced, the American company still posting a higher operating margin rate of 9.9 percentage points.

“This suggests a greater capacity to catch up if the restructuring measures are successful,” concludes Jefferies.

Currently, Air Liquide trades at a valuation discount of 15% compared to chemists specializing in consumer products, based on gross operating profit (Ebitda) expected in 2025. And 20% compared to its immediate comparables.

For Jefferies, the discount compared to chemists is explained by the more favorable dynamics of these groups both in terms of growth and progression of operating income. But the trend should reverse in 2025.

The bank estimates that Givaudan, which serves as a benchmark for chemists specializing in consumer products, will experience revenue growth of 5.4% (on a like-for-like basis) and operating profit of 5%, compared to 5.8% respectively. % and 11% for Air Liquide.

As a result, “investors should be more favorable to Air Liquide compared to chemicals specializing in consumer products,” concludes Jefferies.