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Chart Industries (NYSE:GTLS) +3.2% in Tuesday’s trading as UBS upgrades shares to Buy from Neutral with a $170 price target, raised from $152, saying execution continues to improve and the benefits of the Howden deal are now resulting in strong de-levering, but this is underappreciated by the market.
The Howden acquisition lowered cyclicality of Chart’s (GTLS) portfolio by adding to the aftermarket service business, but also led to a ~$3.4B increase in net debt, and drove a three-turn multiple de-rating, according to UBS analyst Manav Gupta.
The analyst models Chart (GTLS) generating more than $600M in free cash flow in 2024 and net debt dropping from $3.7B to $3.1B by year-end 2024, or ~2.5x, and believes once leverage drops to this level, the stock could see 2x-3x multiple expansion.
Once Chart (GTLS) achieves the 2.5x leverage ratio target, Gupta thinks the company also could initiate a stock buyback program.
After Monday’s market close, Chart (GTLS) announced an order to produce more than 20K tons/year of renewable green hydrogen for one of California’s largest such projects.
