JPMorgan analysts maintained an Overweight rating and $400 price target on Linde (NYSE:LIN) in a note Wednesday, stating there are good arguments for owning industrial gas companies over a longer period of time.
The analysts explained that Linde said it is currently sorting through 209 clean energy investment opportunities.
"Clean energy opportunities are, in theory, outside of Linde's core business investment portfolio. Only a fraction of the 209 projects are likely to be executed. The projects that come to be approved would require $9.6b in investment over the next three years," they added.
"Linde also states that it believes that its clean energy investment opportunity is roughly $50b over the next decade."
The analysts believe the implications of the investment opportunities are "both substantial and not well understood."
"A typical $1b investment project for Linde would deliver $100m in EBIT. Linde's typical EBIT margin is in excess of 20%. Accordingly, a $100m EBIT project would imply annual revenues of roughly $500m," the analysts wrote.
They stated that if Linde's revenues are about $45 billion in 2028, the incremental volume effect of a $1 billion investment would be about 1%.
"If we assume that average investments in clean energy for Linde total $3b per year, incremental volume growth from the clean energy investments would be about 3% annually beginning in 2028," said the analysts.