Morningstar

Chart Industries: Howden Bulks Up Chart’s Capacity To Attack Hydrogen and Other High-Growth Markets

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Securities In This Article
Chart Industries Inc
(GTLS)

We are initiating coverage on Chart Industries GTLS with a fair value estimate of $165, a narrow moat rating, and an Exemplary capital allocation rating. We do see the firm as substantially undervalued at current prices, as the market remains concerned about the impact of the Howden deal on Chart’s future prospects. In contrast, we believe that the Howden deal offers several material benefits that should drive improved profitability and growth going forward.

Since 2020, Chart Industries has engaged in a very successful strategic pivot toward expanding its specialty portfolio of products toward high-growth areas such as hydrogen and LNG. It made several attractive investments and joint ventures with key partners that enabled it to materially increase the amount of in-house content for larger projects, lowering costs and providing more control over delivery timeframes. The greater degree of control over integrating its equipment and processes also drove pricing power, lifted margins, and increased customer switching costs. Three-year targets introduced at its 2022 Analyst Day included a 17%-plus CAGR on revenue, 25%-plus CAGR on earnings per share, and margin expansion of 300-600 basis points.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Stephen Ellis

Strategist
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Stephen Ellis is a strategist, AM Resources, for Morningstar*. He covers US and Canadian midstream companies.

Before joining Morningstar in 2007, Ellis worked as a freelance analyst for The Motley Fool and worked in project and financial analysis for Environmental Systems Research Institute (ESRI), a supplier of geographic information system software and geodatabase management applications. Before assuming his current role in 2017, he was director of equity research for financial services and a senior equity analyst. He is also a former editor of the Morningstar Opportunistic Investor newsletter, and a former member of the Economic Moat Committee, a group of senior members of the equity research team responsible for reviewing all Economic MoatTM ratings issued by Morningstar. Ellis is a former member of Morningstar’s China Economic Committee, which provided research on the long-term outlook for the Chinese economy.

Ellis holds a bachelor’s degree in business administration from the University of Redlands. He also holds a master’s degree in business administration from the University of Redlands.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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