LINDE vs Ghani Gases – Players Fighting For Market Share

Standard Capital Securities (Pvt) Ltd.

There are two market leaders in industrial gas producing industry viz. LINDE (formerly British Oxygen) and Ghani Gases (GGL) having a market share of 34% and 25% respectively (market share taken in terms of reported capacity). Though, LINDE is a company with diversified SBUs vis-a-vis GGL which is mainly in hospital & industrial gases. We believe that the growth of this industry depends upon stable growth in industrial base of the country itself where industrial gases are used.

Both entities operating at 60- 65%; however this industry would thrive only if industrial capacities increases viz. steel & other sectors.

GGL reported growth since its inception in last few years. LINDE has recouped sales growth in ongoing calendar year given impact of plant expansion. GGL used market penetration strategy whist LINDE regained its market in industrial segment. Both companies are indulged in price war, wherein, LINDE has a larger plant base and also into electrode segment. We expect electrode sales may increase given company’s assertion of its usage in power segment (matter reported in 2QCY15 report).

Reported new arrivals & expansions

LINDE ~ Stainless steel electrode was successfully launched in 3QFY15, as per recent LINDE report. LINDE is also in special gases, refrigerants and zodian. We expect top line to increase with the launching of products in current calendar year.

GGL ~ As per recent notices to KSE, GGL is setting up a chemical plant for Ethyl Alcohol which would further connect to food grade CO2, Nitrogen based fertilizer and mainly to obtain energy from biogas. This venture would be a key contributor to GGL. Project cost is Rs1.9bn which will reach to Rs2.2bn inclusive of working capital requirement. Entity is planning to raise Rs1,050mn from Equity (Right Issue) rest would be raised through debt element.

Though financial cost to be a dent over existing margins for GGL.

We will launch coverage in these companies given clarity on capital layout plans of GGL.