linde & nextera
TRANSCRIPT
Landon BadgettPolitical Analyst
Nina HayesChief Operating Officer
Victor JimenezEmerging Markets Economist
Linde & NextEraEnergy & MaterialsNovember 10th, 2020
Sector OverviewEnergy & Materials
YTD S&P 500 vs XLB vs XLE
No Current Holdings
Energy
Materials
▪ Exploration & Development
▪ Drilling
▪ Refining
▪ Coal
▪ Renewable Energy
▪ Chemical Products
▪ Forestry
▪ Mining
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LindeInvestment Thesis
Market Leader in Production & Development of Products
Sustainable Investing Exposure
Stable and Diversified Portfolio
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LindeCompany Overview
Products and Services
Atmospheric & Process Gases
Equipment & Engineering
• Oxygen, Nitrogen, Carbon Dioxide, Helium, Hydrogen
• Develop and Commercialize New Separation Technology
• Proprietary and Patented Applications
• Service a wide range of gas production and processing services
• Supplies plant components or services to customers
Customers
Manufacturing, Chemicals & Energy, Healthcare, Metals,
Electronics, Food & Beverage, Fiber-optics, Aerospace,
Petroleum Refining and Water Treatment
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LindeCompany Strategy
“Making Our World More Productive”
Sustainability Efforts Efficient Operating Model
● Increased Investment in
Decarburization Projects, Green
Technology & Renewable Power
● Air Quality, Emission, Renewable
Fuel, Water Quality in EM, Droughts
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LindeRevenue Breakdown
+2.2% CAGR
Revenue Growth
Segmented Revenue
Geographic Revenue Breakdown
39 %
24 %
10 %
6 %
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LindeKey Financial Highlights
ROE
EBITDA Gross Margin
ROC
26.1%
9.49%18.2%
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LindePrice Performance
Key Stats
YTD
LTM
6M
1M
+ 40.37 %
+ 30.29 %
+ 11.17 %
+ 24.13 %
Beat 1Q2020 Estimates
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LindeCompetitive Landscape
• HQ: Allentown, PA• Market Cap: 69.1M• P/E: 36.6%• ROE: 16.1%• Dividend: 2.1%
• Producer of industrial atmospheric and specialty gases and performance materials and equipment.
• HQ: Paris, France• Market Cap: 67.3M• P/E: 31.2%• ROE: 12.2%• Dividend: 1.9%
• Through subsidiaries, produces, markets, and sells industrial and healthcare gases, including nitrogen, argon, carbon dioxide, and oxygen worldwide. Europe, U.S., Canada, Africa, and Asia
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LindeComps Analysis
LIN across their competitors is the largest by market share and revenue
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LindeDCF Valuation
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LindeValuation & Sensitivity Analysis
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LindePrice Targets
$274.76
• Exit Multiple – 16.2x
• Base case consistent with historical data
Base Case
$283.18
• Exit Multiple – 16.2x
• Exceeding 2021/2022 sales growth
• Keeping assumptions modest with analyst and management
Upside Case 1
$264.06
• Exit Multiple – 16.2x
• Assuming worst case scenario and they do not meet growth expectations with same exit multiple
Downside Case
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LindeAnalyst Recommendations
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LindeTechnical Analysis
LindeRecommendation
Buy*
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NextEraSector Overview
Energy
▪ Exploration & Development
▪ Drilling
▪ Refining
▪ Coal
▪ Renewable Energy
YTD S&P 500 vs XLB vs XLE
Catalysts
Biden Administration
Sustainability
OPEC and Big Oil struggles
COVID-19
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NextEraInvestment Thesis
Sustainable Investing
Low Costs
Diverse Portfolio of Services
Industry Innovators
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NextEraCompany Overview
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NextEraCompany Strategy
Expansion through Acquisitions Low CostsEmphasis on Renewable Energy
● Announced plans to acquire GridLiance in Q3 2020
● Feb. 2020: Santee Cooper announced NEE as favored bidder
● Gulf Power Acquisition in 2019● Trans Bay Cable in 2018● Oleander Power project in 2018
● Added 580 MW of wind, 911 MW of solar, and 594 MW of battery in Q3
● The final 600 MW of a 1500 MW community service project to be in service later this year
● Largest stand alone-alone battery storage project in the world expected 2023
● Gulf power coal phase-out
● FPL bills are 30% lower than national average
● Renewable energy costs decreasing
2% 2%
22%
74%
2019 Net Generation by Fuel Type MWh Net Generating Capacity MW
9.5% CAGR
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NextEraRevenue Breakdown
● Average number of customers increased 80,000 YoY
● Increase in Net Income of 10.83% YoY● Offering payment extensions and waive
late fees
FPL
● Earnings Increase ~24% YoY● Increase in Net Income of 10.83% YoY
NEER
● Net Income Increase ~16% YoY● Earnings Increase ~12% YoY
Gulf Power
2019 Revenue by Business Segment
63%
29%
8%
Earnings and Estimates
5.3% CAGR
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NextEraFinancial Highlights
CapEx spending Adjusted EPS growth
7.5% CAGR
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NextEraPrice Performance
Key Stats
YTD
LTM
6M
1M
+24.71
+ 28.01 %
-0.50%
+22.24 %
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NextEraCompetitive Landscape
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NextEraComps Analysis
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NextEraDCF Valuation
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NextEraValuation & Sensitivity Analysis
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NextEraPrice Targets
Downside Case● -14.04% downside
potential● 20X Exit Multiple● Extremely low Sales
Assumptions● Increased COGS,
SG&A expenses● More CapEx than
projected
Upside Case● 25.44% upside
potential● 21.2X Exit Multiple● Fairly Aggressive
Sales Assumptions● CapEx in line with
projections
Base Case● 8.45% upside
potential● 21.2X Exit Multiple● Sales Assumptions on
line with Bloomberg● More CapEx than
projected
$81.89$64.91 $94.72
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NextEraAnalyst Recommendations
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NextEraTechnical Analysis
Buy
NextEraRecommendation
Appendix
LindeCustomer breakdown
Americas
APAC EMEA
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NextEraDebt Structure
FPL Customers
FPL Geography
NEER