China’s LNG Ambitions Have This Stock on the Go
In 2008, there were only about 200,000 natural gas vehicles (NGVs) operating on the entire planet.
Today, there are more than 15.2 million. And that figure could rise to 25 million by 2019.
Most of that growth is taking place in China, whose government first established a policy for clean-burning vehicles as far back as 1999.
China’s national plan projects 1.5 million NGVs hitting the road by 2015 and 3 million by 2020.
The country is specifically targeting its transportation sector – buses, taxis, trucks and ocean-going vessels – in an effort to cut pollution.
To make this happen, China has already developed a near-complete industrial supply chain – including natural gas compression and liquefaction terminals.
However, one thing has been standing in the way of total implementation…
According to the China Road Transport Association, the lack of natural gas filling stations has hampered the development of this massive fleet.
China doesn’t have the sophisticated network of pipeline transport we have here in the United States – and it isn’t likely to develop one in the next seven years.
And that’s where Chart Industries (GTLS) comes in.
On the Road
Chart manufactures (among other things) equipment to liquefy and store natural gas.
It also has a fleet of LNG trucks – called “Orcas” – that can transport the fuel to cars and trucks on location, eliminating the need for fixed-location fueling stations.
Chart has over 500 Orcas on the road in China, ready to bring the LNG to customers where and when it’s needed. (It also runs a few hundred Orcas here in the States.)
Furthermore, the company was just awarded a new $50-million contract to provide LNG technology and equipment to PetroChina (PTR).
All of this led to a very strong second quarter for Chart.
Sales rose 25% over the same period last year to $298.3 million, while net income increased 12% to $20 million.
As a result, the company has seen its stock almost double this year. It’s currently hovering around $117 per share – giving it a P/E of 48.
That makes shares a bit expensive – especially compared to peers like Air Products and Chemicals (APD), which trades around $103, with a more reasonable P/E of 22.
Still, Chart has a major inroad into the largest transportation market in the world – and it’s simple yet effective solution for China’s LNG transport issues is likely to keep it moving higher.
If September sends us a market swoon, you might be able to pick up shares on the cheap.
And “the chase” continues,